Fresnillo Plc : Cut to sell after the rally

09/10/2012 | 04:27am Opinion : Bearish under 1830 GBp Target price : 1627 GBp Potential: 5.63% Stop loss: 1900 GBp

LONDON STOCK EXCHANGE Precious Metals / Minerals

Fresnillo plc is a silver and gold mining and exploration company. The company owns and operates silver and gold mines in Mexico. Fresnillo also holds a portfolio of development and exploration projects located along the silver and gold belts of Mexico.

From a fundamental viewpoint, firstly, we note the high valuation of the company. PER for the current year is at 26.37x and expected at 22.62x for next year. With a valuation ratio of 8.73x, the group appears overvalued compared to its business activity. In add analysts polled by Thomson Reuters have revised downwards the earnings per share.

The share has taken benefit from last gold rally, in fact rose over than 14% in the last trading sessions. The share is reaching two important levels, which could stop the bullish trend. We advise to give attention the area between GBp 1780 and 1830. These resistances could give an opportunity to short the share and to take benefit from potential bearish trend. If downward trend will be set up we fix target price at GBp 1627.

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