BMO Analyst: No Faith In Teck Cominco

BMO Capital analyst Tony Robson has lost faith in Teck Cominco Ltd. (TCK).

Mr. Robson downgraded his rating on the stock to "underperform"  and lowered his price target from C$45 to C$30, saying the high price Teck paid for Fording Canadian Coal Trust (FDG) combined with the 50% increase in capital expenditure for the Fort Hills oil sands project will reduce the company's net present value per share by 40%.

He also doesn't like the fact that Teck has picked up more than C$10-billion in debt, and added that Teck's earnings per share will stay flat for the next couple of years, with declines expected longer term assuming a drop in metallurgical coal prices. 

Mr. Robson told clients in a note:

Due to the downgrade in value post Fording, BMO recommends that investors look to other diversified resource companies with better relative value and growth opportunities, such as BHP (BHP), Vale (RIO) or Rio Tinto (RTP).

Scotia Capital analyst Lawrence Smith, meanwhile, maintained his "sector outperform" rating on the stock with a C$55.50 price target, noting approval of this Fording deal was widely anticipated in the market.