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Analyst Upbeat on Diamond Market

Dec 14, 2016 8:43 AM   By Rapaport News
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RAPAPORT... VTB Capital raised its price target for ALROSA shares as buoyant holiday sales are expected to result in a wave of restocking among retailers.

The investment bank increased its 12-month target to $2.30 (RUB 140) from $1.73 (RUB 105), while maintaining a ‘buy’ rating on the Russian diamond miner. The share has increased 75 percent since the beginning of the year to trade at $1.61 (RUB 98) late Wednesday in Moscow.  

“We expect a strong Christmas season to drive consecutive restocking, leading to ALROSA’s share price outperforming,” VTB analysts said in a note.

Investors are overly pessimistic about stockpiling in the midstream and weaker consumer demand, the analysts pointed out. On the contrary, inventory hasn’t accumulated this year, while some firms were looking to increase their stock before the holidays as they anticipate stronger polished orders in the first quarter next year, VTB pointed out.

Meanwhile, U.S. jewelry sales jumped 5 percent year-to-date, with the major retailers such as Signet Jewelers and Tiffany & Co. entering the holiday period with stock levels 7.5 percent below that of last year, said VTB, which in the past has acted as an adviser to ALROSA.

“We expect the season to be strong, washing out jewelers’ inventories, which might drive a strong restocking in the first half,” the report added.

Rejecting another concern about the diamond sector, VTB said the market will likely absorb any increase in supply from major new mines coming on stream next year. This view is in contrast with a report by Panmure Gordon that claimed production from three new mines may increase pressure on rough prices.

ALROSA’s sales grew 48 percent in the first nine months of the year on higher rough demand, in contrast with a slump in the market in 2015. The resulting increase in free cash flow has enabled it to repay a $370 million bank loan from JSC UniCredit Bank received in April 2014, the miner said.
Tags: Alrosa, analysts, finance, holiday sales, holidays, JSC UniCredit Bank, loans, Rapaport News, Signet Jewelers, VTB, VTB Capital
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Not so fast VTB!
Dec 15, 2016 2:35PM    By Gary Wright
VTB Capital is obviously not in the jewelry sector. So far this season, with only 9 days till Christmas, Holiday sales at most jewelry stores are at or below last years level and from our viewpoint, unless the last minute push is stronger than last year, there will not be a lot of "restocking" after Christmas, at least by Independent Fine Jewelers. IMHO, Long term things are looking up for the retail sector, but right now the economy is still WEAK and retailers are just surviving! Gary Wright, President Gary W. Wright Co. Phoenix AZ
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