- Glencore
- 11 March 2025 10:27:26
Source: Sharecast
It noted that Glencore shares have lagged peers since 2023 despite being a consensus long.
"This is likely due partly to the market overhang of it being a large producer of thermal coal, which is not a pure energy-transition commodity (albeit it helps facilitate the energy transition), while the company’s poor governance history (although now being addressed) also has not been helpful for sentiment," the bank said.
"However, at 0.84x NAV and 3.4x EBITDA, we think the valuation is compelling, and we believe that Glencore has a number of self-help levers that it can pull to create value for shareholders and drive the rating higher, without having to consider moving its primary listing away from London, which it has stated that it is considering; but it is important for management to execute on the strategy to drive the rerate."
Berenberg said it reckons that Glencore should undertake the following steps to drive a rerating of its shares.
Firstly, it should sell the Kazzinc asset in Kazakhstan while gold prices are helping to drive better returns, and realise near-term value for an asset Berenberg thinks will become challenging in the long term.
Secondly, the bank thinks Glencore should explore the sale of a minority stake - around 5% to 10% - in its marketing (commodity trading) business to showcase value.
Thirdly, the bank thinks that Glencore should use its internal cash flows and funds from the sale of assets to continue to return funds to shareholders in the form of dividends and buybacks and fund lower-risk growth, whether this be standalone or through exploring joint ventures with peers.
"We also think that Glencore could cut marginal thermal coal volumes, which could have the effect of improving the market balance and prices, offering upside for the shares. Finally, and perhaps most simply, we believe Glencore needs to execute operationally," it added.
At 1025 GMT, the shares were up 1% at 318.61p.