MinRes shares jump as UBS shifts rating from 'sell' to 'buy'
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The news: Mineral Resources was the best performing ASX 200 company in early trading after UBS upgraded its rating on the mining group from 'sell' to 'buy', driven by recent stock weakness.
The numbers: MinRes shares were up 5.5% to $23.15 at 10:40am AEDT, having retreated more than 65% over the last 12 months.
UBS cut its price target from $33 to $28.60. It gave MinRes an "upside scenario" fair value of $36.10 and a "downside scenario" fair value of $17.10.
The context: UBS analysts said their previous 'sell' rating was based on the miner's high operational and financial leverage to its underlying commodities — iron ore and lithium — at a time when the outlook for both had deteriorated.
The emergence of governance issues at MinRes towards the end of last year further complicated matters, they noted, with those problems not yet fully resolved.
However, the analysts said that their upgrade is driven by a reassessment of funding and operational scenarios, and after recent stock weakness, with MinRes shares performing 67% below rival Arcadium Lithium, which was acquired by Rio Tinto and stopped trading on the ASX earlier this month.
The source: UBS research
