Broker tips: Anglo American, London-listed recruiters

Anglo American was under pressure after HSBC downgraded the stock to ‘reduce’ from ‘hold’ and slashed the price target to 410p from 770p as it pointed to the miner’s precarious cash flow situation.

HSBC said that before further capex cuts, Anglo would likely burn at least $2.7bn in 2016 on spot prices to maintain the dividend.

“We see high likelihood of a zeroed dividend (now in our numbers), which saves $1.1bn cash annually,” it said.

Should Anglo reinstate the dividend at a later stage, a payout ratio – with provision for specials – is more prudent.

HSBC said further cost cuts are likely at the 8 December update, but the bank questioned whether this would be enough.

“We see scope for capex to be reduced to around $2.7bn post 2016 and $3.3bn in 2016 (current guidance $3.6-3.9bn),” it said.

HSBC reckons corporate costs and overheads are the key area of viable opex cuts, although not a new target area. Any further cost cut efforts at operations will only go some way to offset more than 5% South African inflation.

The bank estimates that Anglo will still burn $1.6bn in annual cash flow post expected opex, capex and divi cuts on spot prices.

Recruitment consultancy stocks were under the cosh after RBC Capital Markets downgraded some key names as it took a look at the Pan European staffing sector.

The Canadian bank downgraded Hays to ‘sector perform’ from ‘outperform’, keeping the 150p price target, as it sees little upside remaining after the recent rally.

“We also see growth remaining muted in the UK, while Australia remains volatile.”

It cut Michael Page International to ‘sector perform’ from ‘outperform’, trimming the target price to 530p from 610p as it looks for a better entry point.

“We remain supportive of Michael Page for the longer-term, but see greater short-term macroeconomic headwinds compared to our original expectations of accelerating growth into 2016E.”

RBC also downgraded SThree to ‘sector perform’ from ‘outperform’ and cut its price target to 400p from 460p.

The bank said it likes the stock for the long term, as it is well-placed with its developments in Life Sciences and the US.

In the shorter term, however, uncertainty, especially in the UK, has led it to lower all of its white collar staffing forecasts and recommendations.

“We look for a better in-price,” it said.