Morgan Stanley Upgrades Vale To Equal-weight, Says Asset Sale Would Squash Balance Sheet Concerns


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Balance sheet concerns surrounding Vale SA (ADR) (NYSE: VALE) may be alleviated by future iron-ore production and the potential sale of the company’s fertilizer business, Morgan Stanley’s Carlos De Alba said in a report. He upgraded the rating on Vale to Equal-weight, while raising the price target from $4.80 to $6.20.

Potential Asset Sale

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Management has been planning on selling Vale’s fertilizer operations for the past couple of year, in an attempt to reduce debt. According to a Bloomberg article published on August 5, Mosaic Co (NYSE: MOS) is in in late-stage discussions with Vale for purchasing its fertilizer units. Analyst Carlos De Alba estimated the fertilizer division’s value at $2.7–$3.4 billion.

“Regarding the Nacala project financing, we have long included the transaction in our model (~US$2.9Bn in total),” De Alba wrote. He expects the deal to close in 4Q16.

Future Iron-Ore Production

Reuters reported that Vale was considering selling up to 3 percent of its future iron-ore production for as much as $10 billion. “Vale hasn't commented on the news, but we believe that the reported value for such a deal seems high…We estimate the $10bn suggested price tag implies an average realized IO price $11/t above what we model for the next 30 years,” the analyst commented.

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27% profit every 20 days?

This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.


Posted In: Analyst ColorUpgradesPrice TargetAnalyst RatingsCarlos De AlbaMorgan Stanley