The week ahead: KAZ Minerals, Kingfisher

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The week ahead: KAZ Minerals, Kingfisher

Monday 14 August

AGM/EGM

Vedanta Resources

Tuesday 15 August

Trading Statements

Telecom Egypt, Jackpotjoy, H&T Group, Hargreaves Lansdown

AGM/EGM

Falcon Acquisitions

Wednesday 16 August

Trading Statements

Lookers, Balfour Beatty, Foresight Solar Fund, Admiral, CLS Holdings

AGM/EGM

Reabold Resources, John Laing Environmental Assets

Thursday 17 August

KAZ Minerals (KAZ) has been a star of the commodities sector both this year, during which it is up 87%, and from its trough early in February 2016 since when its share price is up over 650%.

A first-half and second-quarter production update issued late last month went down well. The company more than doubled copper output to 118,000 tonnes (kt) and is on track to meet full-year guidance of 225-260 kt. Six-month gold output was strong, too.

Ahead of half-year results Thursday, broker Liberum upgraded estimates to take account of commodity and FX assumptions, as well to reflect better processing recoveries and less grade decline post 2019.

That's why net asset value (NAV) estimates treble from 130p to 385p per share. However, that is still way below today's share price. To get to current levels, copper would have to trade at $3.66 per pound (/lb), argues Liberum.

But keep a close eye on copper, currently at $2.87/lb. Broker Jefferies said recently the red metal could conservatively trade at $2.75/lb next year and $3/lb in 2019. Breaking above $4/lb at some point in the next five years was possible.

Kingfisher (KGF) shares are another kettle of fish. They've largely traded between 300p and 400p for the past four years, and a rush of excitement in May proved premature.

Weakness in France offset growth in the UK, sending like-for-like sales down 0.6% in the three months to 30 April. Bosses remained cautious about prospects on the continent, but the economy there is picking up, so might Kingfisher be about to turn a corner?

Not according to broker UBS.

"A number of unwelcome developments are combining to make life difficult for Kingfisher, in our view," writes analyst Andrew Hughes.

"The ONE Kingfisher plan has had a bumpy start in FY18, B&Q is beset by a weaker macro, falling house prices and rising core DIY market capacity, while in France market share is also under pressure and the market has yet to react to stronger housing stats."

Cutting estimates for the B&Q business and fearing the unified product programme could now take up to seven years, UBS downgrades profit by 2%, 4% and 9% for the next three years.

Kingfisher trades on 12.5 times forward earnings, a premium to peers, but Hughes doesn't see a "quick fix", so cuts his rating to 'sell' and the price target from 335p to just 265p. That implies 13% downside from current prices.

Trading statements

Marshalls, Oxford BioMedica, Allied Minds, India Capital Growth Fund, Frutarom Industries, Hikma Pharmaceuticals, Kaz Minerals, Rank Group, Kingfisher

AGM/EGM

South African Property Opportunities

Friday 18 August

AGM/EGM

Grand Group Investment, System1 Group

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.