Broker snap: UBS downgrades Fresnillo after outperformance



LONDON (ShareCast) - Shares in precious metals miner Fresnillo (Other OTC: FNLPF - news) were hammered on Friday morning on the back of a downgrade by UBS (Berlin: UBRA.BE - news) from 'buy' to 'neutral' after the stock's recent strength.

Since September 10th 2012, Fresnillo has gained 7% while silver prices have fallen 9%. This compares with the average fall for silver stocks (under UBS's coverage) of 2%.

"We believe this outperformance was driven by increased investor appetite for high-quality assets (which FRES offers)," said analyst Chris Lichtenheldt.

"Still a high-quality name, but valuation full. Despite the downgrade, we continue to believe FRES shares offer attractive exposure if silver and gold prices move higher. Fresnillo holds a well diversified portfolio of high-quality silver and gold assets," he said.

Nevertheless, Lichtenheldt notes that the stock currently trades at 1.26 times net asset value and 18.7 times 2013 cash flow, 48% and 44% higher than the North American peer group, respectively.

The broker has maintained its 2,100p target price for the shares.

The stock was down 5.62% at 1,779p by 10:47 on Friday.