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Teck Resources Analysts Bullish After Investor Day: 'The Company Is In An Enviable Position'

Shanthi Rexaline

Diversified mining and metals company Teck Resources Ltd (NYSE: TECK) held its Investor Day in Toronto Wednesday, and analysts came away from the event with their stances largely unchanged. 

The Analysts

Bank of America Merrill Lynch analyst Timna Tanners maintained a Buy rating on the shares and a $30 price target.

MKM Partners analyst Daniel Scott maintained a Buy rating and $26 price target.

BofA: Focus On Cash Return Plan, Project Monetization

Teck Resources updated its base metal expansion plans, with a particular focus on its brownfield Quebrada Blanca II and III initiatives, but was silent on plans to further return cash to shareholders, Tanners said in a Thursday note. 

The company suggested that any decision to pay out a special dividend would need a board review and a finalized joint venture agreement with Sumitomo, the analyst said. 

The lack of a capital allocation roadmap disappointed some investors, Tanners said. 

The analyst sees a temporary spike in met coal capital costs and said Teck justified higher costs on the basis of facilitating production during periods of high prices.

BofA raised its coal price estimate for 2019 by 10 percent and for 2020 by 6 percent, but cautioned investors to factor in the higher near-term costs.

"We are more cautious on demand, and believe its 2024 global outlook assumed a lofty [projection] of above-100Mt steel growth," Tanners said.

Teck shares trade at a discounted valuation, according to BofA.

Catalysts could come in the form of details of cash return plans and evidence that the company's project pipeline can be monetized, the analyst said. 

MKM: Teck Resources In Enviable Position

The investor day was informative, but without any major surprises, Scott said in a Thursday note. 

Teck Resources' forte is in its coking coal operations, which are performing well in a continued strong commodity environment, the analyst said. 

The company is planning for 30-55 metric tons annually of needed restarts and new projects by 2024 to keep pace with the demand growth, Scott said. This is likely to keep markets tight for the foreseeable future, he said. 

Bbase metals operations continue to give solid performance, Scott said. Its financial position remains strong, he said, given CA$6.6 billion ($4.9 billion) in liquidity and no significant note maturities until 2024.

"We view the company's coking coal assets as FCF generating machines over the intermediate to long term, and its balance sheet as solid," the analyst said. 

"With oil sand on line and copper expanding, the company is in an enviable position."

The Price Action

Following a 2.93-percent pullback Wednesday, Teck Resources shares were advancing 2.16 percent to $23.36 at the time of publication Thursday. 

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Latest Ratings for TECK

Date Firm Action From To
Jan 2019 MKM Partners Initiates Coverage On Buy
Jan 2019 Clarksons Platou Downgrades Buy Neutral
Jan 2019 Goldman Sachs Upgrades Neutral Buy

View More Analyst Ratings for TECK
View the Latest Analyst Ratings

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