ubs raise target to $90 Rio At $90February 01 2006 -...

ubs raise target to $90 Rio At $90
February 01 2006 - Australasian Investment Review

Rio Tinto (RIO) has yet to report its full year result to December 31, 2005 but at UBS the analysts have already decided to raise their target price, and what an increase it turned out to be: from $75 to $90 per share.

As far as FN Arena’s overview of ten leading stockbrokers and equity researchers in Australia shows, UBS is now at the pinnacle of the local market, topping Deutsche Bank by $2. Further back are the likes of Macquarie, Credit Suisse and ABN Amro with twelve month price targets of $73.67, $72.64 and $65. Do some have to revisit their numbers or are we experiencing a widening gap between bulls and bears again?

Rio Tinto is scheduled to give us the nitty gritty about their FY05 performance on Thursday February 2, 2006.

UBS would not be surprised to see the company announce an incremental capital management initiative of approximately US$1-2bn. It is the broker’s view this additional capital management program could include a special dividend as off-market buyback’s in Ltd stock
(remember Rio has a dual listing). While EPS accretive, this would reduce Ltd’s shareholding in the DLC and lower liquidity, the broker says.

The new $90 price target is based on 13x estimated 2006 earnings, which went up as the broker raised commodity price forecasts for the year.

RIO shares closed at $75.80 yesterday.