Credit Suisse said: "Attractive valuation & pieces falling
into place; UPGRADING to OUTPERFORM (from Neutral); Lowering
"We are upgrading our rating to Outperform. With the overhang
removed from an impending writedown and clarity achieved on the
choice for a 30ktpd mill option at Tasiast we are upgrading our
target multiple for KGC to 1.3x P/NAV (from 1.1x), in line with the
senior average of 1.3x. KGC also provided clarity on production,
costs and capex for 2013 and thus our OpCFa multiple has increased
to 18x (from 13x) in-line with KGC's implied reserve life of ~18
years. Our DCF and CF declined by 30% and 20%.
"Negative revisions on the underlying, why the upgrade? Negative
news was expected and the stock has traded off 16% over the past
two months likely on the impending negative newsflow. After
modelling the results, we believe negative guidance has been
adequately priced into the stock.
"More importantly: KGC has the elements in place for a
re-rating. In our view a successful re-rating occurs when there is
a senior level change in strategy or personnel, followed by a
period of rebasing expectations, and a period of delivery. In early
2012, while KGC was undervalued, no real change had occurred. Now
we have had senior level management changes, and a change in
strategy. We are now approaching a period of rebasing of
expectations with guidance flowing into market expectations. Over
2013 we expect KGC to rebuild its operational credibility by
delivering on guidance.
"To be clear this will be a challenging year with all-in-costs
amongst highest of peer group and a y-o-y production decline, and
we don't expect out-performance operationally. But we do expect the
period of disappointing against market expectations to end and KGC
to be allowed out of the penalty box. At these valuation levels it
is worth stepping in.
"CS EPS estimates are lowered to $0.65/$0.63/$0.33 from
$1.00/$1.08/$0.65 for FY13/14/15 to reflect lower revenue and
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