MARKETS SPECTATOR: Sandfire warmth

Brokers are bullish on Sandfire Resources after its maiden interim result, and the miner's stock still has plenty of room to rise.

No fewer than four brokers have this morning upgraded Sandfire Resources (SFR) after the copper miner yesterday reported its maiden interim profit.

UBS upgraded the stock to buy from neutral based on underlying valuation support of around $7.60 per share. "While DeGrussa has experienced minor ramp-up issues, we believe the underground mine and plant will both be running at nameplate by mid year," UBS said in a note to clients.

"We expected DeGrussa to produce circa 75ktpa for the first three years before reducing to 60-65kt for the remaining four to five years. However, we believe that recent exploration results will lift existing underground resources and also provide vectors for potential new mineralised areas.”

Deutsche Bank has also upgraded the gold and copper miner to buy from neutral, with a 12-month price target of $8.30 per share.

It notes that although its net present value and price target are unchanged, it believes the worst of the commissioning issues are now behind it as plant performance is on the improve and production rates remain on-schedule for calendar 2013.

Elsewhere, JP Morgan upgraded the stock to neutral from underweight, saying following a significant de-rating in the stock, partly attributable to ramp-up issues, it has upgraded the stock given improving operating trends and unstretched valuation based on JP Morgan’s copper price forecasts.


Source: Paritech Pulse

The chart above of Sandfire Resources looks very encouraging indeed. Firstly, the stock has been sold down by more than 30 per cent this year versus an underlying move in the benchmark index of at least 6 per cent. The increasing volume to the downside looks to have been climactic when viewed in the context of yesterday’s strong report.

We’ve seen a big reversal in price off of a major support level with much of the broking community caught behind the eight ball, or underweight the stock, as evidenced by the number of upgrades. From here, I see tremendous upside in the stock as the investment community realises it got too bearish and things are nowhere near as bad as they priced them to be.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles