Overview
Anglo American PLC (AAL) headquartered in London, was founded in 1917. Its principal operations include mining, exploring and processing of metal and minerals globally. The group mainly Explore’s metals such as copper, platinum, diamonds, iron, nickel, manganese and thermal coal. The group has 69,000 employees working worldwide. The group has mining operations in Africa, the Americas and Australia. AAL’s stock is listed on the London Stock Exchange and Johannesburg Stock Exchange.

Key Statistics


Financial Results and Review – Financial Year 2018 (US$, million)

(Source: Annual Report, Company Website)
 
Financial Commentary – Financial Year 2018
The company revenue for the financial year 2018 increased by 5 per cent from $ 26,243 million in 2017 to 27,610 million in 2018. Mainly because of increase polished diamonds demand from the US and Chinese retailers in the first half. The company generated underlying EBITDA of $9,161 million in the financial year 2018 showing an increase of 4 per cent in comparison with the financial year 2017. In FY18, free cash flow stood at $3.2 billion, decreased by 36 per cent in comparison with the 2017 financial year. The company delivered profit attributable to equity shareholders of $3,549 million in the financial year 2018 representing an increase of 12 per cent in comparison with the last year. The company had reduced net debt to $2.8 billion in the financial year 2018, showing a 37 per cent decline since 2017 – 0.3x net debt / underlying EBITDA, mainly because of disciplined capital allocation has helped to strengthen the balance sheet of the company. The company reported Earnings per share for 2018 was 2.80 which was 13 per cent more than 2017 reported Earning per share of 2.48.
 
Ratios
 
The reported EBITDA margin of 28.50 per cent for the financial year 2018 stood considerably higher than the industry median of 20.40 per cent. Net margin reported was 15.80 per cent in the financial year 2018, reflecting an increase of 0.3 per cent when compared with last year data. Return on equity stood at 15.20 per cent which was higher than the industry median of 13.00 per cent. At liquidity front, Anglo American PLC’s current ratio was higher than the industry median of 1.84, reflecting the sufficient current assets to pay its short-term obligations. On leverage front, the debt-equity ratio was significantly lower as compared to the industry median, reflecting that the company is less leveraged as compared to its peers.  

Share Price Performance

(Source: Thomson Reuters)
 
On 14th March 2019 at the time of closing, Anglo American PLC shares quoted at GBX 1,943.2, down by 3.64 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 2,078.50/GBX 1,433.64. At the time of writing, the share was trading 6.51% lower than its 52w High and 35.54% higher than its 52w low. Stock’s average traded volume for 5 days was 3,821,612.60; 30 days - 3,826,509.60 and 90 days - 3,959,623.11. The average traded volume for 5 days was down by 0.13% as compared to 30 days average traded volume. The company’s stock beta was 1.49, reflecting high volatility as compared to the benchmark index. The outstanding market capitalisation was around £27.30 billion.
 
Valuation Methodology

Note: All forecasted figures and Peers have been taken from the Thomson Reuters. Currency exchange rate taken for 1 USD = 0.756 GBP

Conclusion
The positive outlook for the global jewellery business and healthy demand for polished diamonds from the US and Chinese retailers. The current trading levels indicates the stock movement towards 52-week high with support coming from a few growth drivers like increased financial performance especially revenue and profit attributable to shareholders and positivity coming from economic forecasts.Based on strong fundamental performance and the valuation done using the above method, we have given a BUY recommendation at the closing price of GBX 1,943.20 (as on 14th March 2019) with single-digit upside potential based on 4.5x NTM EV/EBITDA on FY19E EBITDA.

Note- GBp or GBX are intechangeably used for Pence Sterling. 

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