The South32 Ltd (ASX: S32) share price is pushing higher on Tuesday.
In afternoon trade, the mining giant’s shares are up 1.5% to $4.46.
This means that South32’s shares are now up 50% since this time last year.
Can the South32 share price keep rising?
While the South32 share price has been flying over the last 12 months, one leading broker still sees scope for it to keep rising from here.
According to a recent note out of Goldman Sachs, its analysts have a conviction buy rating and $5.70 price target on the company’s shares.
Based on the current South32 share price, this implies potential upside of 28% for investors over the next 12 months.
But it gets better. Goldman believes South32’s free cash flow generation will be strong, allowing it to pay big dividends in the coming years. It is forecasting a fully franked 27.5 US cents per share dividend in FY 2022 and then a 47.3 US cents per share dividend in FY 2023.
Based on current exchange rates, this equates to 40 cents per share and 67 cents per share dividends, which represent yields of 9% and 15%, respectively.
Why is Goldman bullish?
Goldman Sachs has named three reasons why it is bullish on the South32 share price.
It commented:
Valuation: The stock is trading at c. 0.95x NAV (A$5.10/sh) including the completion of the acquisition of a 45% stake in the Sierra Gorda copper mine in Chile.
Strong FCF outlook: We forecast a FCF yield of c. 18% in FY23 (over 25% at spot), driven mostly by exposure to base metal price momentum.
Increased capital returns: We assume the buyback continues to be extended (at ~US$200mn p.a) and assume S32 resets its balance sheet metrics (we think targeting US$0-800mn net debt through the cycle based on our view of suitable balance sheet leverage) pays out 60% of earnings (40% ordinary, 30% special dividend component) with the FY22 result. On our estimates, S32 is on a dividend yield of c. 8-13% in FY22-FY24.
The post Broker names 3 reasons the South32 share price could be cheap appeared first on The Motley Fool Australia.
Should you invest $1,000 in South32 right now?
Before you consider South32, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and South32 wasn’t one of them.
The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of January 13th 2022
More reading
- 2 high-yield ASX 200 dividend shares to fight inflation according to brokers
- 2 ASX 200 dividend shares to buy according to a top broker
- Here are the 3 most heavily traded ASX 200 shares on Friday
- Why did the South32 share price beat the other ASX 200 miners today?
- Broker says South32 share price is great value and one of the ‘best’ options for investors
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
from The Motley Fool Australia https://ift.tt/jf4eRQJ
Leave a Reply