Skip to main content

Market Overview

Goldman Sachs Initiates Vale, Sitting On The Sidelines

Goldman Sachs Initiates Vale, Sitting On The Sidelines

Goldman Sachs has started coverage of Vale SA (ADR) (NYSE: VALE) with Neutral rating, saying that expected lower iron ore prices could offset volume growth.

Vale, the world's largest iron ore producer, is in the final stages (expected for late 2016) of delivering its flagship iron ore project, S11D, which should increase shipments by 31 percent over the next three years. However, the brokerage expects average EBITDA growth of just 5 percent per year over these three years, as lower expected iron ore prices will offset volume growth.

Related Link: Get Paid To Play In Latin America

"On our $40 IO price deck, we forecast negative FCF until the project kicks in fully (i.e., in 2018), which should pressure leverage to 5.5x ND/EBITDA YE2017E (4.0x in 1Q16). We see rising balance sheet risk with IO prices below $40. Vale trades at 6.5x growth-adjusted EBITDA (i.e., 2019E), broadly in line with its historical mid-cycle multiple," analyst Humberto Meireles wrote in a note.

Meireles has a price target of $3.80 on Vale (PNs) and $4.40 on Vale ONs.

ADRs of Vale closed Wednesday's regular trading session at $5.05.


Related Articles (VALE)

View Comments and Join the Discussion!

Posted-In: Analyst Color Long Ideas Emerging Markets Price Target Commodities Initiation Markets Analyst Ratings

Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at