Broker tips: GSK, Central Asia Metals

10th Oct 2024 16:43

(Sharecast News) - GSK's $2.2bn payment to settle 93% of outstanding Zantac lawsuits in the US was close to the "best case scenario", according to Jefferies, which said the announcement should remove a significant weight on the share price.

The broker reiterated a 'buy' rating and 2,000.0p target price for the stock after GSK said on Thursday that it has now settled about 80,000 Zantac lawsuits in the US after reaching an agreement with 10 firms that represent 93% of the Zantac (ranitidine) state court product liability cases pending.

Jefferies said that the settlement equated to around 40.0p per share and came in at the bottom end of its previous $2-3.5bn estimate and reckons that the stock should rise around 10% from the removal of most of the Zantac uncertainty.

"Dismissal of 93% of cases for $2.2bn nears our best case scenario, and should remove the majority of Zantac overhang on the stock. Importantly we believe the settlement cost is also well below most figures we have heard from investors," the broker said.

Analysts at Berenberg downgraded Central Asia Metals from 'buy' to 'hold' on Thursday and lowered its target price on the stock from 230.0p to 210.0p following the group's Q3 production results a day earlier.

Central Asia Metals said copper volumes from its Kounrad mine in Kazakhstan came in at 3,600 tonnes, just short of its 3,700-tonne estimate, while at the Sasa mine in North Macedonia, ore mined of 196,000 tonnes came in lighter than estimates for a 201,000-tonne print.

Zinc volumes of 4,800 tonnes were "a bit light" versus estimates of 5,200 tonnes and grades were 2.92% versus Berenberg's 3.05% estimate, meaning that the miss was a mixture of throughput and grades. Lead volumes of 6,900 tonnes were broadly in line with estimates of 7,000 tonnes.

The German bank pointed out that the company's guidance has been reiterated, with Sasa at the low end, highlighting that there had been no change since its previous guidance.

Berenberg also said growth projects at Sasa appeared to be on track, with the backfill plant operating consistently, and dry commissioning of the dry stack tailings plant now operating well, with the initial placement of the filter cake expected in Q424.

"We continue to think that Central Asia Metals is an excellent business, with strong FCF generation and an attractive (circa 8-9%) dividend yield. However, there is some risk to its 2024 guidance, and given the higher operational risk profile as the company adjusts its mining method at Sasa, we think that the market would prefer it to deliver on its guidance rather than give management the benefit of the doubt. Further, a M&A overhang remains a headwind for the market, with a deal still needed to diversify and grow the business," said Berenberg.