NCM – Credit Suisse rates as Neutral

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Under pressure from the Indonesian government Newcrest has been forced to accept, from FY19, an increase in the tax rate to 32% from 25% and the royalty rising to 3.75% from 0.7%. From FY21, the company must divest a further 26% of its ownership in Gosowong to 49% from 75%.

As a mature operation with a short life – Credit Suisse models three years – the impact is considered small and not material to Newcrest.

However, the broker believes it sends a signal regarding Indonesia as a place to invest in exploration or development. Neutral rating and $20.30 target maintained.

Sector: Materials.

Target price is $20.30.Current Price is $21.51. Difference: ($1.21) – (brackets indicate current price is over target). If NCM meets the Credit Suisse target it will return approximately -6% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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