UPDATE: Goldman Sachs Sees Opportunity in Eldorado Gold (EGO); Analyst Raises Rating to 'Buy'
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(Updated - August 10, 2016 8:40 AM EDT)
Goldman Sachs upgraded Eldorado Gold Corp (NYSE: EGO) from Neutral to Buy with a price target of $5, implying upside of 23%. Analyst Andrew Quail sees opportunity given underperformance and growth projects.
"The company’s 87ppt underperformance vs. the GDX YTD is unwarranted, in our view," said Quail. "We believe EGO is well positioned to fund its highly prospective organic growth opportunities, and expect growth projects to drive company-wide adj. FCF improvement of 60% by 2018E. A pro forma analysis based on EGO’s expectations suggests that if the $900mn of pending China asset sales close in 2H16 (per guidance), it will likely have the only net cash balance sheet across our gold coverage. We raise our target multiple to 10.5x (from 9x) to better reflect growth prospects and capital allocation outlook."
Discussing catalysts, the analyst said, "We believe EGO shares are likely to react favorably to updates on key organic growth projects at its investor day in September. We also flag the potential for the miner to reinstate its dividend in early 2017."
Shares of Eldorado Gold Corp closed at $4.05 yesterday.
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