Alexander Hacking, an analyst from Citi, maintained the Buy rating on Alcoa (AA – Research Report). The associated price target is $32.00.
Alexander Hacking has given his Buy rating due to a combination of factors surrounding Alcoa’s strategic move to propose a takeover of Alumina Limited (AWC). The acquisition is seen as a strategic fit for Alcoa, consolidating ownership and thereby potentially resolving permitting issues in Western Australia (WA), reflecting management’s confidence in the assets. Although the offer represents a premium over the current share value, the proforma calculations suggest that the deal’s impact on Alcoa’s 2024 expected enterprise value to EBITDA ratio would be roughly neutral, indicating a fair valuation that neither dilutes nor significantly enhances shareholder value.
Furthermore, Hacking notes the new CEO Bill Oplinger’s proactive approach since taking the helm at Alcoa, suggesting a dynamic and strategic leadership style. The proposed deal is expected to bring minimal synergies, primarily in the form of reduced administrative overhead from AWC, and has already received support from AWC’s largest shareholder. The potential tax implications and the establishment of a secondary listing in Australia for Alcoa are also under consideration. Despite the offer being characterized as “less than generous” by Citi’s AWC analyst, the Board’s support may indicate a positive outlook for the WA assets, all of which play into Hacking’s optimistic view and contribute to his Buy rating for Alcoa’s stock.
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Alcoa (AA) Company Description:
Alcoa Corp. engages in the production of bauxite, alumina, and aluminum products. It operates through the following segments: Bauxite, Alumina, and Aluminum. The Bauxite segment represents the company’ global bauxite mining operations. The Alumina segment includes the company’s worldwide refining system, which processes bauxite into alumina. The Aluminum segment combines smelting and casting operations produce primary aluminum. The smelting operations produce molten primary aluminum, which is then formed by the casting operations into either foundry ingot or into value add ingot products, including billet, rod, and slab. The company was founded by Charles Martin Hall on July 9, 1886 and is headquartered in Pittsburgh, PA.
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