Broker Recommendations for LYC* Macquarie 19-Mar-14 Macquarie...

Broker Recommendations for LYC

* Macquarie 19-Mar-14

Macquarie has reviewed forecasts following the first half result. Despite progress at the LAMP during the first half, Macquarie notes output has not yet reached Phase 1 capacity as operational issues delay the plant ramp up. A period of steady-state production is required to gain confidence and deliver a consistent revenue stream.
The Neutral rating is retained and the price target is reduced to 25c from 30c.


* JP Morgan 12-Mar-14

The interim results were in line with the broker's forecasts. The key announcement was confirmation the company needs additional capital for debt repayments.

The stock is attractive but JP Morgan maintains a Neutral rating, given the issues in ramping up and the requirement for additional capital. The broker does not think the market will become positive until the company can demonstrate the plant is operating at capacity. The 40c target is maintained. Neutral


* UBS 12-Mar-14

Lynas' interim loss of $60m was in line with the previous half but better than the broker's $100m loss forecast on lower costs. Falling cash has meant gearing has risen to 42% and LYC has indicated it will require additional funding despite production meeting targets.

With the outlook for rare earths unclear the broker has elected to cut production expectations and mark forecast prices to spot. The broker fears a deep-discount raising and has downgraded to Underperform.
Target falls to 20c from 39c. Downgrade to Underperform from Neutral


* Deutsche Bank 12-Mar-14

The interim loss was similar to what Deutsche Bank expected. The broker continues to think the company will require further equity and debt refinancing to better align the capital structure with the ramp up of operations.

The Hold rating is retained, although the broker acknowledges the near-term funding risk. The price target is steady at 30c. Hold

http://fnarena.com/dsp_recommendations.cfm?searchsymbol=LYC


=> The common concerns raised by brokers are
1. Finance /Gearing
2. Production
3. Market confidence
4. RE market outlook

Production and sales figures release on 1/4 and 30/4 will resolve the concern and provide market confidence. This will be followed by Debt restructure and financing announcements.

Brokers will upgrade their recommendations and price targets. WOW what is going to happen to LYC SP?

Consensus is the RE market outlook, esp for Nd/Pr & La will be strong growth. And the demand and these RE prices will rise soon. That is why other than UBS, others did not mention as an issue. Moreover, LYC will be cash flow positive at present prices.

However the Going concern warning impost by LYC auditor is a valid reminder that LYC is a risky investment and investors should always be prepared for probable losses as with many equity investments in ASX.