Anglo American surges as Deutsche and Credit Suisse hail overhaul

Anglo American surged as Deutsche Bank and Credit Suisse lifted their target prices on the stock following the company’s full year results.

On Tuesday, Anglo outlined its promised “radical” overhaul as it announced a pre-tax loss of $5.5bn after $3.8bn of write-down since the half year.

The company said it planned to reduce the core portfolio to 16 diamond, platinum group metals and copper assets and announced further cost-cutting measures.

Deutsche Bank raised the price target to 465p from 300p, saying four main issues have now been addressed: commitment to a lower gearing level; an intention to sell some of the bigger, higher quality assets for value; presentation of free cash flow scenarios if spot prices worsen; and most importantly, a higher cost cutting target for 2016.

“We could not have asked for a bigger or more detailed plan – but now we move to timely execution,” it said, as it reiterated its ‘hold’ rating on the stock.

Meanwhile, Credit Suisse lifted its target price on Anglo to 470p from 320p, keeping it at ‘neutral’ as it raised its estimates for 2016 following the results.

“The company needed to act decisively and the cost cutting targets are materially better than we and the market expected, equating to more than a 10% year-on-year reduction in 2016 (excluding FX).”

“If the company delivers on its promises the re-rating could continue, however industry deflation signals ongoing price risks, leverage is high and asset sales carry obvious execution risks.”

At 1217 GMT, Anglo shares were up 7.3% to 426.95p.