S32 2.39% $3.00 south32 limited

Is South 32 Going North?

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    BHP Billiton spin-off South32 finished off its first week as a separate listed entity with a bit of flourish.
    The share price outperformed and the new company, trading under the ASX code S32, gathered a fistful of analyst assessments that its share could head further north still.
    South32 shares — BHP shareholders were gifted them on a one-for-one basis — closed out the week at $2.31, a 12.6 per cent gain from its tepid performance on its first day of trading on Monday when it closed at $2.05.
    On yesterday’s closing price it is a $12.2 billion company, and Australia’ third biggest listed miner behind its parent BHP and Rio Tinto. It slots in as the ASX’s 24th biggest company between Ramsay Health and Sydney Airport.
    South32 and BHP would have been disappointed with South32’s closing price on its debut. Most in the market were tipping a closing price of more than $2.20.
    South32’s chief executive Graham Kerr said on the day that he was “not unhappy’’ and besides, he was “not too focused’’ on the lukewarm day one share price performance.
    Nor did he say the closing price on Monday was a strong endorsement of South32’s outlook, or that the market had got excited about what the simplification of BHP meant for the parent. Still, he would have smiled at South32’s stronger share price performance by the end of the week. As for the simplified BHP, it outperformed Rio Tinto during the week.
    But the combined package of a South32 and a BHP share of $31.56 was nevertheless below the $32.40 BHP close on the Friday ahead of Monday’s South32 debut, due to general market moves.
    The equities desk at Goldman Sachs — the investment bank was an adviser on the demerger — had an interesting spin on South32’s outlook when it placed a $2.70 a share target price on the newcomer. It said one of its key reasons for the “conviction buy’’ recommendation was that unlike its parent, South32 did not have any exposure to iron ore, the price of which the firm is bearish on.
    It said South32, with its mix of aluminium, manganese, coal, nickel and silver/lead/zinc, was “not geared to the Chinese steel and construction cycle.’’
    Goldmans also pointed to South32’s better-than-industry cost-cutting potential and the historical strong share price performance of demergers in the Australian market. “While the assets were non-core to BHP, the creation of South32 delivers a unique large cap, non-iron ore exposed equity with a robust balance sheet in the Australian market,’’ Goldmans said.
    Ratings agency Standard & Poor’s yesterday assigned a BBB+ long-term rating to South32’s $US1.5 billion ($2bn) senior unsecured, syndicated bank facility, and a A-2 short-term rating to its commercial paper.
    The ratings were in line with expectations. S&P said the ratings were based on its view of South32’s “satisfactory” business risk profile and “modest” financial risk profile.
    S&P credit analyst May Zhong said most of South32’s assets were positioned at the lower half of the global cost curve. “The group’s earnings before interest tax and depreciation and amortisation margin has been resilient, remaining at around 20 per cent when commodity prices have been cyclically low during the past few years,’’ Ms Zhong said.
    JPMorgan initiated coverage of South32 during the week and set a $2.95 a share net present value-based target.
 
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Last
$3.00
Change
0.070(2.39%)
Mkt cap ! $13.58B
Open High Low Value Volume
$2.98 $3.01 $2.95 $41.52M 13.86M

Buyers (Bids)

No. Vol. Price($)
4 18790 $3.00
 

Sellers (Offers)

Price($) Vol. No.
$3.01 44320 6
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Last trade - 16.10pm 29/03/2024 (20 minute delay) ?
Last
$3.01
  Change
0.070 ( 2.84 %)
Open High Low Volume
$2.94 $3.01 $2.94 6145452
Last updated 15.59pm 29/03/2024 ?
S32 (ASX) Chart
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