Broker tips: Anglo American, Rathbones

(Sharecast News) - Berenberg downgraded Anglo American on Thursday to 'hold' from 'buy' as it took a look at metals and mining stocks, saying it was taking a "breather" following a strong share price performance. The bank, which maintained its 4,200p price target on the stock, said it was updating its Anglo American model for its revised price deck, making some adjustments in terms of diamond prices and costs, and increasing costs in its metallurgical coal model.

"We like the AngloTeck story in the long term, and think that there is clear scope for share price appreciation as the market better understands the financial metrics of the combined business," it said. "In the short term, we are below H1 consensus estimates and see scope for a slight market disappointment with its H1 results, with a number of the non-core assets underperforming.

"We move to gold for now, and take profits."

In the note, Berenberg said it continues to advocate an 'overweight' position in mining and thinks that the market volatility has created disconnections in commodity and equity performance versus fair value and, as a result, opportunities to create alpha.

In the base metals space, Berenberg said that while it likes Antofagasta, it remains at 'hold' and sees better upside in H2 2027 when the growth is imminent. The bank's favoured copper names are Boliden, ACG Metals and Atalaya Mining.

It upgraded Central Asia Metals to 'buy' from 'hold', taking the view that the shares are cheap, offer NAV accretion from the Cygnus Metals deal, and that it could even be a bid target itself.

As far as gold stocks are concerned, Berenberg said it continues to like Endeavour Mining and Wheaton Precious Metals in the large-caps - the latter benefiting from inflation protection - and Pan African Resources and Resolute Mining in the small and mid-caps.

RBC Capital Markets cut its price target on Rathbones to 1,950p from 2,400p following the company's surprise regulatory update earlier in the week, which it said will likely complicate and lengthen the group's turnaround story.

On Tuesday, Rathbones said it expected to incur £60m of additional costs over the next two years as it implements changes to address issues identified in a review of its wealth management business.

RBC said it was updating its forecasts following the regulatory update.

It said: "This includes: 1) the cessation of investment management fees on client cash; 2) lower net flow forecasts, principally reflecting the pause of onboarding new EDD [enhanced due diligence] clients and lower inflows from existing EDD clients for the next 12 months; 3) higher assumed investment performance for Q2 FY26, reflecting the rebound in markets since the 1Q trading update."

The net impact of these movements to EPS across FY26E/ FY27E/FY28E is -5%/-2%/-6%, the bank said.

RBC said: "The regulatory update issued by the group has arguably complicated the investment case in the near term by adding uncertainty around the outcomes of reviews in to client outcomes and 'aspects of pricing', and likely delays the inflection to positive organic growth (where the market may now look to net flows ex EDD clients for evidence of underlying improvements).

"We still expect the group to embark on a multi-year journey of improvement under CEO Jonathan Sorrell, better positioning the group to capitalise on the considerable opportunity for growth.

"Taking this into account we see an attractive overall risk/reward skew in Rathbones shares. On our updated numbers the stock is trading at less than 9x FY27E P/E, which we believe places it among the cheapest Wealth Managers in the world."

RBC said this overlooks the group's market positioning and the potential appeal it could offer to an acquiror looking to achieve scale in the UK wealth market. The bank maintained its 'outperform' rating on the stock.