Citi stays at 'sell' on Fresnillo ahead of 1H numbers

Analysts at Citi stuck by their 'sell' recommendation on Fresnillo stock, pointing to the shares' "expensive" valuation and inability to boost cash returns beyond the "normal" payout.

In particular, the broker pointed to its own "less constructive" outlook on the price of gold and silver, which meant the shares were trading on "unattractive" valuation multiples.

On the basis of the analyst consensus's estimates 12 months forward, the shares were changing hands at 29.1 times earnings - versus a nine-year average of 27.5 times.

They were also sporting a dividend yield of 1.6%, below the nine-year average of 1.9, and on an EV/EBITDA multiple of 11.4 versus 11.9 times.

Fresnillo's deep project pipeline were also expected to keep a lid on its cash returns, Citi said.

Going into the company's first half trading update on 1 August, Citi pegged underlying EBITDA at $537.1m with earnings per share coming in at 31 cents and cash from operations (before working capital) at $437.7.

Citi said it would also looking at the outfit's updates regarding its exploration and projects.

The targe price was also unchanged, at 1,225p.