Raymond James - $0.60 target Sell.EXPENSIVE RELATIVE TO PEER GROUP
Switch African Copper for Equinox or Centenario Copper, says Raymond James
Analysts at Canada’s Raymond James say African Copper is expensive compared to its peers and the share price is expected to continue underperforming.
Author: Tessa Kruger
Posted: Friday , 11 Apr 2008
JOHANNESBURG -
Canadian investment dealers Raymond James says investors should exchange their African Copper (TSX:ACU) shares for Equinox Minerals (TSX:EQN) and Centenario Copper (TSX:CCT). African Copper is reckoned as expensive compared to its peers and judged as set to continue underperforming.
Analyst Tom Meyer said in a report that African Copper shares traded at a P/NAV of 1.28 times compared to Equinox Minerals trading at 0.66 times and Centenario Copper at 0.52 times.
Raymond James had reduced African Copper's Net Asset Value Per Share estimate from C$1.55 to C$0.78 on the basis of quarterly disclosures and a reconciliation of technical data.
The firm said African Copper shares were expensive relative to the copper development peer group which traded at a P/NAV of 0.66 times and the copper producer peer group which traded at 0.87 times.
Meyer said they estimated that 2009 would be the first full year of production at the company's fully owned Mowana mine in Botswana. The first copper concentrate was expected to be produced here in May 2008.
"The company will generate an estimated US$32million in Ebitda in 2009, implying that it currently trades at a 2009 Enterprise Value (EV)/Ebitda of 4.5 times versus the producer peer average of 3.8 times."
Alternatives for investors looking to gain exposure to near term copper production stories were Equinox Minerals (TSX:EQN) and Centenario Copper (TSX:CCT), both trading at a significant discount to African Copper, and expected to appreciate and outperform the S&P/TSX Composite Index over the next twelve months, said the report.
Many companies covered by the dealer currently traded at a minimum of 65% of their respective all-time highs, but African Copper's share price was at 43% of its all time high.
"We attribute the poor performance of the share to the significant number of changes in the scope of the Mowana project from inception and the limited exploration success on its very large Matsitama concession.
"Despite being in what we view as a copper bull market, the underperformance of African Copper shares relative to its peer group is striking and not likely to be reversed in the coming months." Raymond James reduced its target price for the share over the next six to twelve months from C$1.20 to C$0.60.