HSBC, UBS downgrade Randgold on valuation but lift target after results

Randgold Resources was the subject of a couple of ratings changes on Tuesday following the gold miner’s annual results the previous day.

HSBC cut its view on the stock to ‘hold’ from ‘buy’ on the back of share price strength, noting the shares have rallied 37% year-to-date.

However, the bank lifted the price target to $82.40 from $72.30 as a result of the improved outlook for long-term production, operating costs and encouraging exploration results.

UBS took a similar stance, cutting its rating on the stock to ‘neutral’ from ‘buy’ following a sustained outperformance in 2016, but lifting the price target to 6,250p from 4,750p.

“The recent site tour reinforced our view that RRS remains the best managed and highest quality gold stock in our European coverage universe and we believe its low cost position, strong balance sheet and a strong track record of capital discipline warrant a valuation premium,” the Swiss bank said.

It added that while Randgold continues to offer attractive equity exposure to gold price upside, after sustained outperformance in 2016 - RRS is up 45% versus the gold price up 12% - it is difficult to justify further multiple expansion and it may be difficult for the stock to further extend its valuation premium versus peers.

UBS said the fourth quarter results were solid, with lower cost guidance underpinning robust free cash flow in full year 2016.

At 1545 GMT, Randgold shares were down 0.3% to 5,985p.