A UBS broker has given Mineral Resources Limited (ASX: MIN) a huge upside of 86% if its demerger plans go ahead, as originally reported by the Australian Financial Review yesterday afternoon.
The broker assumed that its enterprise value trades six times its earnings bere interest, taxes, depreciation, and amortisation (EBITDA). Furthermore, a price target of $83 was provided along with a rating of buy.
Other trading desks have different takes on their valuations of the company, with some stating that its lithium operating segment is worth as much as the company itself. The Australian Financial Review reported that the business is likely trading at three times forward EBITDA.
Using comparables analysis of similar companies in its peer universe, AFR said it could potentially be rated as worth $10 billion.
Rumours have circulated about a potential spin-off of Mineral Resources. If that comes to fruition, Mineral Resources’ lithium operating segment will be spun-off to become an independent entity.
As my Fool colleague Mitch noted last Friday, the benefit of this spin-off is that the entity would have a concentrated focus on unlocking value purely from lithium extraction, which may lead to gains in internal efficiency and, ultimately, a better share price performance.
Mineral Resources share price snapshot
The Mineral Resources share price made a new all-time high yesterday, with shares closing at $73.08 each for the day. They have since reached a newer all-time high of $75.65 this morning.
Shares of the mining services company are trading for $74.99 at the time of writing, a rise of 2.61%.
The company share price is up 33.91% year to date. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is down 5.94% over the same period.
The company’s market capitalisation is $13.84 billion.
The post Lithium spin-off? UBS tips 80% upside for Mineral Resources share price appeared first on The Motley Fool Australia.
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More reading
- 3 ASX All Ordinaries shares hitting all-time highs on Monday
- Mineral Resources share price lifts on positive lithium project update
- Possible lithium spinoff makes Mineral Resources share price undervalued: Credit Suisse
- Here are the top 10 ASX 200 shares today
- Brokers name 3 ASX shares to buy today
Motley Fool contributor Matthew Farley 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.
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