CIMB INCO Long-Short View On valuation gap

Long-Short View On valuation gap - by Erwan Teguh

We believe Inco's recent outperformance is hard to justify. Valuation gaps between Inco and both Antam and Vale (parent company) promise a rewarding trading opportunity, in our view. Inco's valuation premium gap is peaking and would soon narrow, we believe. We recommend a switch to Antam, which now trades at a discount. We believe Antam is a more hedged bet, supported by its gold business, and potentially benefiting when nickel prices rebound further. It could also book better margins and growth than a pure nickel producer like Inco. For exposure to Inco, we believe Vale is now more attractive.