HSBC upgrades Randgold to 'buy', expects further dividend growth

Analysts at HSBC upgraded their recommendation for shares of Randgold Resources on Thursday from 'hold' to 'buy', telling clients they expect the outfit to hike its payout by 50% in 2018 after the company reported record production and increased profits for its most recent trading year.

In the same research note, the broker revised its target price for Randgold down to 7,700p from its previous 7,800p estimate, explaining that the positive impact from gains on the back of an expected 3.5% increase in its US dollar valuation was offset by revisions to its assumptions for pound sterling.

The Asia-focused lender went on to explain that after a "somewhat pedestrian" third quarter, the firm had returned a "rock solid" performance in the three months leading to 31 December, with a 12% year-on-year jump in group sales, alongside a 6% retracement in unit costs and a 19% jump in profits received from mining.

HSBC also highlighted how Randgold remained debt free with a closing cash balance of $720m, up 39% year-on-year, helping to support the 54% boost to its full-year 2017 earnings per share of $2.96 and $2 a share annual dividend payout.

Randgold's DPS was seen remaining at $3 per share through 2020.

"We expect Randgold's operational outperformance and unrivalled track record of discovering and developing high-quality assets in West and Central Africa to continue to set the group apart. Over time these qualities have resulted in low volatility relative to peer group and earnings multiples that trade at sustained and substantial premia."

As of 1120 GMT, shares had fallen 3.03% to 6,026.00p.