Expect re-rating of AWC

MY TAKE,

I think Alcoa is doing a great job in hiding the real story about AWC. truth is considering the conditions they'd be wrapped with the fundamentals of this even if world growth slows and china growth comes back to a more sustainable level.

I think many fund managers and broking firms were skeptical and waiting to for the dust to settle on China and the resource prices. The market is factoring in a lower growth china and hence resources stocks have moved accordingly. I think this one has been oversold.

From the last couple of announcements its obvious AWAC has improved its costs and is also benefiting from the lower Aussie Dollar, productivity gains and lower energy costs AND AS SUCH the EBITDA margin of $100 per tonne of Alumina Produced which is on target for at 7.6 million tonnes for the year gives them a sizeable cash flow and profit considering the economic conditions and lower prices.

Whilst some were buying and others were selling (obviously more selling due to the china slowdown) it appears the Alumina segment is weathering the storm nicely for Alcoa.

I think broking houses will continue to re-rate AWC to a buy at these levels. With Alumina carrying very little debt and with Alcoa splitting one should see the price of this stock move back to its 200 day moving average and definitely higher if CITIC, BHP or RIO look to acquire a company on the cheap.