We added Glencore to the Analyst Focus List on 18th Jan’16. Our AFL
inclusion rationale was that we identified multiple, near term catalysts that
would reduce GLEN’s credit risk and drive an equity re-rating. Over the
period, GLEN concluded a $0.5bn precious metal streaming sale,
refinanced its $8.5bn one-year revolving credit facility on comparable
terms to those obtained in 2015, plus increased its 2016 disposal target to
$4-5bn (from $2-3bn in Dec’15). Over the period, GLEN’s CDS has fallen
from ~1,140bps to ~530bps. We expect further catalysts in H1’16, most
significantly the disposal of a 30-49% stake in Agriculture (JPM value at
$8.0bn on 100% basis), will reduce balance sheet risk and drive further
outperformance. Therefore with our catalyst driven investment thesis well
advanced, we remove GLEN from the AFL. However we remain
Overweight - the shares are still attractively valued at ~7x EV/EBITDA in
2016 at spot commodity prices, with an ~18% FCF yield.