Analysts at Berenberg downgraded mining giant BHP from ‘buy’ to ‘hold’ on Monday, stating “the big fella” was lacking near-term catalysts.
Berenberg said BHP had elected to unify its dual-listed structure, or DLC, as part of an effort to simplify the business, with the primary listing of the stock set to move to Australia only, resulting in the primary London listing moving to a secondary listing and, in turn, the shares moving to the standard segment of the LSE.
The German bank, which cut its target price on the stock from 2,700.0p to 2,200.0p, thinks this will result in index funds, which make up roughly 14-15% of the PLC register, being unable to hold the shares due to BHP dropping out of the FTSE 100 and will also leave some shareholders whose mandates are to own UK stocks with a UK domicile unable to own the shares.
However, Berenberg stated that for now, it believes the stock lacks near-term catalysts and prefers exposure to Anglo American.
Speaking of, analysts at Barclays downgraded multinational mining company Anglo American to ‘equal weight’ and lowered their target price on its shares from 3,600.0p to 2,700.0p on Monday, stating there appeared to be “turbulence ahead” for the group.
Barclays said the collapse in iron ore, lump premiums and platinum group metal prices left Anglo American in-line with peers on a spot one-year forward price-to-earnings ratio, close to the widest P/E premium and narrowest sum-of-the-parts discount for the stock in five years.
The bank also highlighted that it was concerned that an air pocket in PGM demand triggered by chip shortages could last longer than the market assumes.
“We lower our PGM price deck by ~28% for ’22 (EPS -19%). Along with our ‘lower for longer’ iron ore view, this leads us to downgrade AAL to EW ahead of what could prove a turbulent 6-12 months. We lower our PT by 25% to £27 based on 0.95x NPV (1.15x prev) to reflect these risks,” said the analysts.
