Vale raised to Buy at Morgan Stanley on cheap valuation, asset sales

|About: Vale S.A. (VALE)|By:, SA News Editor

Vale (VALE +2.6%) has underperformed other major miners in the past year and now trades at a 30% discount to Australian competitor Rio Tinto in forward P/E - too cheap, according to Morgan Stanley analysts who upgrade shares to Buy with a $17.50 price target.

The firm forecasts Vale’s return on equity improving to 16% in 2014 from 10% in 2013, as efforts to divest non-core assets and cut costs should finally show up on the bottom line as the Brazilian real stabilizes at a weaker level; Vale's cancellation of its Rio Colorado potash project in Argentina due to the country's turbulent economic and political environment reduced the investment budget by ~$3.7B.

Last week, J.P. Morgan recommended Vale for its high-quality iron ore.