Antofagasta Plc : Expensive but may be a safety

Antofagasta Plc relative valuation is now OVERVALUED. It was previously rated UNDERVALUED, and has a fundamental analysis score of 75.

Our analysis is based on comparing Antofagasta Plc with the following peers – Vedanta Resources plc, KAZ Minerals PLC, First Quantum Minerals Ltd., Anglo American plc, Lonmin Plc and Fresnillo PLC (VED-GB, KAZ-GB, FQM-GB, AAL-GB, LMI-GB and FRES-GB).

Relative Valuation

Antofagasta Plc’s price of GBP 7.18 is greater than CapitalCube’s implied price of GBP 6.00. At this level, CapitalCube believes that Antofagasta Plc is overvalued. Over the last 52 week period, the stock has fluctuated between GBP 6.20 and GBP 8.74.

Relative Valuation

Company Overview

  • Considering peers, relative outperformance over the last year and the last month suggest a leading position.
  • Antofagasta plc currently trades at a higher Price/Book ratio (1.37) than its peer median (0.68).
  • We classify ANTO-GB as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • ANTO-GB has a successful operating model with relatively high net profit margins and asset turns.
  • Compared with its chosen peers, changes in the company’s annual earnings are better than the changes in its revenue, implying better than median cost control and/or some economies of scale.
  • ANTO-GB‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • While ANTO-GB‘s revenues growth in recent years has been around the peer median, the stock’s below peer median P/E ratio suggests that the market likely sees the company’s long-term growth prospects to be fading.
  • The company’s level of capital investment suggests it might be under-investing in a business with above median returns.

Investment Outlook

Antofagasta Plc has a fundamental score of 75 and has a relative valuation of OVERVALUED.

Antofagasta Plc appears on the top right hand quadrant of CapitalCube’s Value – Price Matrix. We classify this as ‘Safety’. In other words, Antofagasta Plc has a relatively high Fundamental Analysis score of 75, while being potentially overvalued and trading higher than its CapitalCube Implied Price of 6.00. There might be some safety in this stock where it’s fundamental strength perhaps justifies its relatively higher price.

Fundamentals Vs Relative Valuation

Quadrant label definitions. Hover to know more

Safety, Value Play, Value Trap, Speculative

Drivers of Valuation

ANTO-GB has a Harvesting profile relative to its peers.

We classify ANTO-GB as Harvesting because of the market’s low expectations of growth (P/E of 25.35 compared to peer median of 51.36) despite its relatively high returns (ROE of 5.38% compared to the peer median ROE of 0.05%).

The company currently trades at a higher Price/Book ratio of 1.37 compared to its peer median of 0.68.

Valuation Drivers

Quadrant label definitions. Hover to know more

Outperforming, Harvesting, Challenged, Turnaround

ANTO-GB has moved to an Harvesting from a relatively high ROE profile at the prior year-end.

ROE % (On Common Equity)
 

Peer Analysis

A complete list of valuation metrics is available on the company page.

Company Profile

Antofagasta Plc operates as a holding company with interests in copper mining, transport and water distribution businesses. The company operates through the following segments: Los Pelambres, Esperanza, El Tesoro, Michilla, Antucoya, Exploration & Evaluation, Railway & Other Transport Services, Water concession, and Corporate & Other Items. The Los Pelambres segment primarily produces copper concentrate and molybdenum as a by-product. The Esperanza segment produces copper concentrate containing gold and silver which is sold on to smelters for further processing and refining into copper cathodes as well as the production of silver and gold. The El Tesoro and Michilla segments produce copper cathodes. The Antucoya is a development project. The Railway & Other Transport Services segment provides rail cargo and road cargo together with a number of ancillary services. This segment transports copper cathodes and sulphuric acid to mines in the Antofagasta region. The Water concession segment processes and distributes potable water to domestic customers and untreated water to industrial customers in Chile’s Antofagasta region. Antofagasta was founded on April 7, 1982 and is headquartered in London, the United Kingdom.

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