15th November 2013
Miner Vedanta Resources is being tipped as a ‘buy’ for intrepid investors despite its latest market update showing a sharp drop in revenues writes Philip Scott.
The FTSE 100 listed metals and mining group firm whose main operations are based in India, in its six-month results showed that its revenues fell 17% to $6.2bn and the underlying earning per share collapsed by 70% to 29.3 US cents.
Given the group’s shares have fallen by 18% in the past six months, the update was in line with broker expectations.
Helal Miah, investment research analyst at The Share Centre, says: “The sharp declines are partly the result of the continued ban on iron ore mining in two states, lower commodity prices and foreign exchange losses.
“However its energy business produced record levels of oil and gas and other divisions increased production of zinc, lead and silver and the aluminium business performed well.”
Miah asserts that investors should be pleased to hear the simplification of the group’s structure has completed, which should help to lower costs, improve access to capital markets and enhance the visibility of earnings and cash flow. In addition, with its proximity to many emerging markets, the company should be well positioned to benefit from increasing demand for natural resources.
He adds: “The share price has fallen a long way from its peak a few years ago, but given the impressive production growth of the various commodities and further oil discoveries, we continue to recommend Vedanta Resources as a ‘buy’ for high-risk, growth seeking investors.”