Figure 112: Anglo American, $mn (unless otherwise noted)

Anglo American

AGLJ.J

Target price, ZAR:

400

Market capitalisation, $mn:

36,991

Share price, ZAR:

378

Enterprise value, $mn:

53,034

Potential 12-month return:

11.9%

Dec-YE

2017

2018

2019E

2020E

2021E

Dec-YE

2017

2018

2019E

2020E

2021E

Income statement

Balance sheet

Revenue

28,650

30,196

31,143

32,616

33,046

Net operating assets

33,172

32,521

32,966

33,970

34,797

Underlying EBITDA

8,823

9,161

11,313

10,878

10,753

Financial instruments

211

159

189

210

227

Underlying EBIT

6,247

6,377

8,404

7,877

7,694

Equity

22,972

23,598

25,898

27,606

28,905

Net interest

-631

-529

-361

-240

-247

Minority interest

5,910

6,234

6,459

6,665

6,861

Taxation

-1,774

-2,196

-2,556

-2,429

-2,369

Net debt

4,501

2,848

797

-90

-742

Minority interest in profit

-891

-812

-1,501

-1,371

-1,311

Net profit for the year

3,166

3,549

3,986

3,838

3,767

Balance sheet ratios

Underlying earnings

3,272

3,237

3,986

3,838

3,767

Gearing*

16.4%

10.8%

3.0%

-0.3%

-2.6%

Underlying EPS, USc

257

255

314

302

297

Net debt to EBITDA

0.5x

0.3x

0.1x

0.0x

-0.1x

RoCE

17.8%

18.4%

23.5%

21.7%

20.8%

Thomson Reuters consensus EPS, USc

296

262

241

RoIC (after tax)

15.1%

11.9%

17.5%

14.7%

13.9%

DPS declared, USc

102

100

157

181

208

RoE

15.6%

13.9%

16.1%

14.3%

13.3%

Underlying EBIT

Cash flow statement

Platinum

512

705

1,377

2,042

2,088

Operating cash flow

8,101

7,325

9,184

8,274

8,262

EBIT margin

10%

12%

24%

30%

31%

Capex (net of disposals)

-2,150

-2,818

-4,000

-4,015

-3,956

Diamonds

873

694

554

705

779

Other cash flows

-691

-494

0

0

0

EBIT margin

15%

11%

9%

11%

11%

FCF

5,260

4,013

5,184

4,258

4,306

Copper

923

1,234

1,458

1,176

1,388

Equity shareholders' cash

4,604

2,944

3,736

3,017

3,120

EBIT margin

22%

24%

30%

26%

29%

Dividends and share buy-backs

-618

-1,291

-1,686

-2,130

-2,468

Nickel

0

75

87

146

168

Surplus (deficit) cash

3,986

1,653

2,051

887

652

EBIT margin

0%

13%

15%

22%

24%

Cash flow ratios

Iron ore and manganese

1,978

1,357

3,299

2,721

2,380

EBIT margin

57%

39%

71%

63%

61%

Working capital days

33

21

15

16

16

Coal

2,274

2,538

1,926

1,399

1,207

Capex/EBITDA

28.0%

35.9%

39.2%

40.6%

40.4%

EBIT margin

32%

33%

29%

21%

18%

FCF yield

16.8%

10.6%

12.8%

10.7%

10.9%

Other

-313

-226

-298

-312

-316

Equity shareholders' yield

22.1%

10.3%

11.2%

9.1%

9.4%

Underlying EBIT

6,247

6,377

8,404

7,877

7,694

Cash conversion

1.4x

0.9x

0.9x

0.8x

0.8x

Income statement ratios

Valuation

EBITDA margin

31%

30%

36%

33%

33%

SoTP DCF fair value and calculation of target price

$mn

ZAR/sh

EBIT margin

22%

21%

27%

24%

23%

Platinum

9,948

110.6

EPS Growth

49%

-1%

23%

-4%

-2%

Diamonds

6,327

70.4

Dividend payout ratio

40%

39%

50%

60%

70%

Coal

6,418

71.4

Input assumptions

Copper

8,017

89.2

Nickel

1,524

17.0

ZAR/$

13.31

13.24

14.28

14.40

14.49

Kumba Iron Ore

5,782

64.3

Platinum, $/oz

950

880

843

900

966

Samancor manganese

2,811

31.3

Diamond realisations, $/ct

162

171

168

181

187

Anglo Ferrous Brazil

3,393

37.7

Copper, USc/lb

280

296

290

295

319

Corporate & other

-3,642

-40.5

Hard coking coal, $/t

188

206

187

170

165

Total enterprise value excluding minority interests

40,578

451.3

Iron ore fines (62%Fe, CIF China), $/t

71

66

88

85

78

Attributable net debt as at 31 December 2018

-5,188

-57.7

Investments as at 31 December 2018

159

1.8

Required breakeven price

Equity value as at 27/3/2019

35,549

395.4

Breakeven price - 3PGM, $/oz

774

791

851

877

824

Rounded to

400.0

Breakeven price - copper, USc/lb

216

201

198

225

230

Share price on 26/3/2019

378.1

Breakeven price - coking coal, $/t

107

125

119

122

125

Expected share price return

5.8%

Breakeven price - Export thermal coal, $/t

59

67

66

72

75

Plus: expected dividend yield

6.2%

Sales volumes

Total implied one-year return

11.9%

Platinum, koz

2,505

2,424

2,100

2,200

2,200

Share price range, ZAR:

Diamonds (consolidated sales), mn ct

33.1

31.7

30.3

32.1

33.3

12-month high on 19/3/2019

385

12-month low on 4/4/2018

262

Total iron ore, mnt

61

46

62

66

68

Price move since high

-1.7%

Price move since low

44.6%

Total copper segment, kt

579

668

663

653

634

Metallurgical coal, mnt

19.8

22.0

22.0

24.0

26.0

Calculation of discount rate

Export thermal coal, mnt

31.0

30.0

28.3

30.1

30.1

Attributable Cu eq volumes, kt

2,803

2,614

2,705

2,839

2,904

WACC

9.5%

Cost of debt

5.0%

Volume growth

-1.7%

-6.7%

3.5%

5.0%

2.3%

Risk-free rate

4.0%

Tax rate

30%

Contribution to FY19E attributable underlying EBITDA

Equity risk premium

5.0%

After-tax cost of debt

3.5%

Beta

1.30

Debt weighting

15%

Cost of equity

10.5%

Terminal growth rate

3.0%

Platinum (80% of

Coal

AMS)

28%

15%

Diamonds (85% of

Valuation ratios

De Beers)

Dec-YE

2017

2018

2019E

2020E

2021E

11%

P/E multiple

6.4x

8.9x

8.4x

8.7x

8.8x

Samancor

Dividend yield

6.2%

4.4%

6.0%

6.9%

7.9%

Copper

EV/EBITDA

4.1x

4.8x

4.0x

4.0x

4.0x

Manganese

P/B

0.9x

1.2x

1.3x

1.2x

1.2x

6%

Minas Rio

Kumba Iron Ore

Nickel

16%

NAV per share, $

18.0

18.6

20.4

21.8

22.8

8%

2%

NAV per share, ZAR

240

246

292

313

330

(51%)

14%