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Broker snap: UBS upgrades Polymetal on M&A speculation

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Broker snap: UBS upgrades Polymetal on M&A speculation

Fri, 25 January 2013

UBS has raised its rating for precious metals miner Polymetal from 'neutral' to 'buy' and hiked its price target for the stock from 1,170p to 1,300p, saying that it's 'a golden time to buy'.

The broker said that to reflect the recent resource base expansion by Polymetal and the company's latest results, its 2012-2014 earnings per share (EPS) forecasts have been raised by 5-30%.

"We think that now is the right moment to use weakness in the stock price as potential merger with Polyus Gold may be a strong driver."

UBS said that, based on reports, a sale of ONEXIM's 37.8% stake in Polyus Gold could be on the cards and may be followed by Nafta (which owns 40% of Polyus) seeking a merger with Polymetal.

The broker estimates that the combined company would have had gold-equivalent production of over 2.5m ounces in 2012 "with better scope for synergies and wider options for both organic growth and M&A".

UBS has raised its 2014-2017 output forecast by around 10% and lowered its average cash cost estimates by 5.0%. The broker said: "Recent resource expansion at Albazino and acquisition of Olcha deposit should offset worsening of production profile at depleting Khakanja and Voro mines."

Shares were up 2.11% at 1,113p by 09:47 on Friday.

BC

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