SBCitgroup
Earnings Change & Recommendation Upgrade
High yielding zinc leverage
† After a period of volatile share price performance driven by waning sector sentiment and global growth/geo-political concerns, we have upgraded Zinifex to Buy, High Risk (1H), previously Hold (2H).
† Zinc remains our preferred base metal with expected further inventory declines driven by persisting supply deficits for the next 3 years.
† FY06 EAT estimate upgraded 5% to A$950m driven by marking to market June quarter metal prices. FY07e EAT downgraded 5% to A$1.33b driven by lower Century lead grades and higher exploration, but would be 30% higher at spot metal prices.
† We assume that Zinifex pays out all excess cash over the next 12-18months and have increased our final FY06e dividend to A70¢/share fully franked and total FY07e dividend to A$1.20/share.
ZFX
zinifex limited
