Morgan Stanley considers the potential finalisation of the acquisition of a 10% equity stake in Sierra Rutile by the International Finance Corp is a positive. This would add significant local knowledge to an operation that has suffered from an expected 40-60% increase in capital expenditure and unlawful strike actions.
The investment by the IFC is predicated on the company jointly investing in the expansion of future production through the Sembehun project and progressing the project would be a tick of approval for the economics, in the broker’s view.
Overweight rating and Attractive industry view maintained. Target is $11.25.
Target price is $11.25.Current Price is $9.88. Difference: $1.37 – (brackets indicate current price is over target). If ILU meets the Morgan Stanley target it will return approximately 12% (excluding dividends, fees and charges – negative figures indicate an expected loss).