The gold argument
We are bullish on gold, upgrading our price assumptions by around 25% to 27% over the next two years, with potential for upside surprise. Subsequently, we are raising our earnings forecasts for Antam by 90% to 25%. A long-time nickel player, Antam, could see gold contribution to revenue and profit doubling. Valuations are not cheap but the counter offer the only gold exposure in town. Risks would include stubbornly high ferronickel cost, immediate ban on nickel ore export, and higher than assumed derivative loss. Upgrade to Outperform.
Upgrade to Outperform
With bullish outlook for gold with the potential for overshooting, a much more visible impact of gold to earnings, and somewhat limited downside risk on nickel, there is a trading opportunity on Antam. Valuations are not cheap though while risk persists. We base our target price on blended DCF and target multiples and arrive at Rp1,275.
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