UPDATE: Bank of America Upgrades Vale SA to Buy on Risk/Reward

Bank of America upgraded Vale SA

from Neutral to Buy and maintained a $23.00 price objective. Bank of America said, "We upgrade Vale to BUY from Neutral, as the stock now implies an 18% upside potential to our US$23/ADR price objective, on top of a 4% dividend yield. We think the risk reward balance is turning to Vale's favor and base our upgrade on: 1) capital discipline (= no Rio Colorado), 2) ST impacts from cost cuts, 3) upside bias on iron ore prices (our US$120/t est is 19% below spot), 4) 30% underp. vs Rio Tinto in the last two years, 5) unlocking value through asset sales, 6) delivering growth, 7) main overlooked event of the decade (extension of Valepar's shareholder agreement) could happen in the ST, 8) valuation at 5.9x EV/EBITDA and 8.9x P/E, 12% discount to hist avg, 9) little exposure to Brazil's domestic market, and 10) we think investors are not overweight the sector/stock." Vale SA closed at $19.47 on Wednesday.