Vedanta Resources has been on the slide this month and the mining group’s investor meeting on Friday has only led to further falls.
The recent slump in crude oil and commodity prices have been hitting the company, and on top of that there are concerns about a tax bill of up to $3.2bn for its Cairn India subsidiary from India.
As it unveiled cuts in capital expenditure plans at its Capital Markets day its shares have dropped another 16.7p or nearly 4% to 435p.
With commodity prices down, Vedanta has cut its capital expenditure for 2015 from $1.9bn to $1.5bn, and for 2016 from $2bn to $1bn. It said:
The reduction in capital expenditure combined with cost reductions reflects the group’s target of achieving gearing of 25% in the medium term and maintaining a progressive dividend policy.
Analysts at Investec said:
The company had announced more details around the capital expenditure cuts it hinted at back in January, as it struggles to optimise free cash flow in the face of weaker commodity prices.
Elsewhere among the mid caps, recruitment Michael Page International is up 17.5p at 547p after a positive note from Morgan Stanley. Analyst Toby Reeks said:
Our view that the stock would underperform as estimates fell to a more stable level has proven wrong as performance has been strong. We are positive on staffers and owning later-cycle Michael Page makes sense to us. We move to overweight [from equalweight] with a price target of 590p.
Ophir Energy has added 4.6p to 133.9p as Deutsche Bank issued a buy recommendation:
Following completion of the Salamander transaction and full year results, we integrate the acquired south east Asian assets into our Ophir valuation, raising our target price by around 3%. The geographic footprint is broader and the funding source more diverse, but the core ‘find and monetise’ strategy is unchanged.
As most of the sector steps back from exploration, Ophir steps forward, using its financial strength to build, mature and carry resource inventory through cycle. Crystallising value does still require disposals to be delivered and the cycle to improve. But solid valuation support at current levels suggests little, if anything, is priced-in for substantial disposal/exploration upside.
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