HeidelbergCement Rises as MainFirst Sees Upgrade for Debt
HeidelbergCement AG (HEI), the world’s third-largest cement maker, jumped the most in more than four months after MainFirst Bank AG analysts predicted the company will regain an investment-grade credit rating next year.
HeidelbergCement rose as much as 5.5 percent to 46.48 euros, the steepest intraday gain since Aug. 3 and the biggest move today on Germany’s benchmark DAX Index. (DAX) The stock, which was trading up 5.3 percent at 1:15 p.m. in Frankfurt, has jumped 42 percent this year, valuing the company at 8.7 billion euros ($11.6 billion).
Debt at the Heidelberg, Germany-based cement producer is rated Ba1 at Moody’s Investors Service, the highest non- investment grade rating, and an equivalent BB+ at Fitch. The company cut net debt in the third quarter by almost 10 percent, and beat a spending-reduction target by 21 percent, it said on Nov. 8.
“Cash and cost savings have become a vital part of Heidelberg’s DNA,” Christian Korth and Tobias Fahrenholz, analysts at Frankfurt-based MainFirst, wrote in research report today. “We forecast the company to reach investment grade rating in 2013 already, without divestments being necessary.”
An investment grade, which will also depend on how quickly rating companies react to earnings improvements, is likely to attract new investors to HeidelbergCement shares, the analysts said. It may also mark the start of “meaningful and reliable” dividend payments by the company, they said.
The MainFirst analysts raised their recommendation on the cement producer’s stock to “outperform” and estimate the share price will rise to 55 euros in a year.
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