Broker snap: Credit Suisse unconvinced by prospects for Kazhakmys

LONDON (ShareCast) - In a research note put out this afternoon analysts at Credit Suisse (NYSEArca: CSMA - news) indicate that they are not convinced by copper miner Kazhakmys' apparently cheap valuation on near-term PEs. Nonetheless, they admit that in the near term "macro momentum will continue to drive performance" and that the stock is "highly leveraged to the copper price." However, in their opinion the markets are, "under-estimating the earnings and returns fade the company could face over the coming years." As they explain, Kazhakmys is aiming to spend $6bn on growth and investment over the next five years. Growth is long dated (from 2015+) and capital expenditure intensity is very high at circa $20,000/t annual production. Hence, given long dated volume growth and cost pressures they expect earnings and cash flow growth to be negative over the next three years. One possible catalyst for the share price, they add, could be a potential sale of its 26% stake in ENRC. Lastly, they point out, their long-term cash flow driven valuation for the company's shares is £12/sh. As of 14:52pm shares of Kazhakmys are retreating by 2.8% to the 1,160p mark. AB