Ivanhoe upgraded on share price drop
Like many other copper companies, shares of Ivanhoe Mines Ltd. (IVN/TSX) have languished in recent weeks. Given that Ivanhoe is likely to complete a major corporate transaction at some point over the next year, TD Newcrest analyst Craig Miller thinks it is undervalued. He upgraded the stock to “speculative buy” from “outperform,” and maintained a price target of $20 a share.
Ivanhoe put out a technical report in early June in which it laid out more details about its flagship Oyu Tolgoi project in Mongolia. Mr. Miller decided the positives and negatives tended to “cancel each other out” so that his valuation of the company is very close to what it was before.
Ivanhoe is reviewing strategic options as it tries to finance the US$4.6-billion initial construction cost for the project. Mr. Miller wrote that the company is likely to bring in a state-owned company looking to secure a long-term supply of copper.
His target of $20 a share is based on a multiple of 1.2 times his estimate of net asset value per share (using a 10% discount rate). He uses a multiple of 1.0 times to value other companies, but believes Ivanhoe deserves a higher valuation because of the “potential takeover premium we believe that the Oyu Tolgoi project alone could support.”
Read more: http://www.financialpost.com/Ivanhoe+upgraded+share+price+drop/3164052/story.html#ixzz0rAtW12fS
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