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FTSE 100 falls as oil slides but Anglo American lifted by diamond sales

Discussion in 'Market News' started by Lily, Jan 26, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    Investors unnerved again by Chinese slowdown and crude price fall

    With global markets tumbling again as oil slides and worries about a Chinese slowdown re-emerge, it’s no surprise to see precious metal miners bucking the trend as investors seek the havens of gold and silver.

    More surprisingly, Anglo American is up 3.7p at 230.3p. But its gains can be attributed to news that rough diamond sales from its De Beers group had more than doubled from $248m to $540m in the first sales period of this year compared to the final one of 2015.

    A year of strong growth with plenty more to come. Full year results were in line with our expectations, with pretax profit rising by 32% to £154m. The group remains on track to meet it’s revenue targets over the next four years, with volumes set to grow by around 50% by 2019. The shares continue to look good value to us trading at a discount to the sector, despite offering the highest net asset value and dividend growth over our forecast period.

    We think the market is probably right to be initially sceptical of the financial aspects of the ‘One Kingfisher’ programme, given the forecast downgrades required for years 1-3, the cash implications and uncertain nature of the back-end weighted profit benefits, although sentiment could improve if the plan can deliver tangible benefits. The shares are trading in line with the sector at 15 times PE to 2016 but we think the heightened risk and liquidity implications are unfavourable and downgrade our recommendation to reduce [from hold].

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