Ignore Simply Wall Street, Blighty. Computer generated claptrap....

Ignore Simply Wall Street, Blighty. Computer generated claptrap. Look to better sources.

The broker analysts are bullish after the 1Q report:

South32 Price Target Raised 8.7% to A$5.00/Share by Credit Suisse03/11/2021 9:13AMNo story, headline only

South32 Price Target Cut 2% to A$4.90/Share by Macquarie22/10/2021 8:43AMNo story, headline only

Goldman Sachs (21 Oct) says:

We retain our Buy rating (and keep S32.AX on the ANZ Conviction List) on:

Valuation: The stock is trading at c. 1x NAV (A$3.88/sh) excluding Sierra Gorda.

Strong FCF outlook: We forecast a FCF yield of c. 15% in FY22 & FY23 (over 20% at spot), driven mostly by exposure to base metals (aluminium & alumina c. 50% of FY22 EBITDA, zinc/nickel c. 20%).

Increased capital returns: We assume the buyback continues to be extended (at US$250mn p.a) and S32 continues to pay out 70% of earnings (40% ordinary, 30% special dividend component). On our estimates, S32 is on a dividend yield of c. 11-12% in FY22 & FY23.

Positive project newsflow: We would see the commitment to the restart of the Alumar aluminium smelter as a positive (c. 6% upside to EBITDA), and highlight the potential for capex on the US$800mn Dendrobium next domain (DND) met coal project to be reduced (which we would view as a positive),

S32 is due to release the PFS results from the Hermosa zinc/silver/lead project (GS NPV US$1.1bn) in Arizona in Nov/Dec.

I am as bullish as the analysts.

Ash