ILU fell over 4% yesterday after UBS downgraded the mineral sands operator to a sell following its strong price appreciation as opposed to major problems within the company i.e. they believe $12 is too rich considering the persistent headwinds around China’s property market and the uncertain global macro outlook. We like ILU’s commodities exposure and its position in each market where it operates but its +20% year-to-date (YTD) gain has considerably outperformed some of its better-known if not directly related, sector peers e.g. South32 (S32) -2.3% and BHP Group (BHP) +1%. For ILU to punch through $12 we believe China’s recovery needs to slowly but surely gather further momentum.
- We had been considering taking profit on our 5% position in ILU as it tested $12, UBS may force us to sharpen the pencil here.
MM remains cautiously long ILU in the $11.40 area
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