someone finally agrees with me - ubs sell $12, page-43

Citi 06-Jun-13

Target $13.00 (was $18.30). Just like what we've been seeing from the likes of BHP Billiton ((BHP)) and Rio Tinto ((RIO)), the broker suspects a major strategic shift to less production, lower costs and more cashflow and higher shareholder returns is underway at Newcrest. Unlike the two majors, who are simply addressing market demand, Newcrest is also dealing with a falling gold price.

All in all, Citi likes the plan, noting this is what investors want to see before confidence in the gold sector can build again. A higher gold price wouldn't hurt either. The problem for Citi is that decreased production means lower revenue, which adds up to lower earnings and a lower valuation. Adding this into the mix sees Citi cut its call to Sell from Neutral and slash its price target.

Downgrade to Sell from Neutral

Credit Suisse 06-Jun-13

The broker expects the plunge in the gold price will initially drive downgrades to price assumptions, earnings and valuations. Then, there'll be secondary downgrades to production as producers adjust plans so they can be sustainable in the event of an even more punitive gold price environment.

At this stage, Credit Suisse sees Newcrest's challenge to ensure net free cash generation at Lihir, instead of growing production, while the Kapit project, at current gold prices, is likely to be deferred.

In this environment, the rating has been downgraded to Underperform from Outperform and the price target reduced to $14.55 from $24.20.

Downgrade to Underperform from Outperform



Deutsche Bank 06-Jun-13

Target $15.70 (was $19.10). With most of the big projects done and dusted and the gold price looking ugly, the broker thinks the company will shift to produce as many low cost ounces as possible. At least for the next few years.

Yet the broker thinks that if Newcrest joins the low capex, lower costs and better cash flow club, it will lead to lower production in FY14. The broker has trimmed its forecasts a little and also lowered the price target, the latter more due to the removal of a premium premium for gold stocks given the current environment.

The Hold call is maintained.
Hold