It certainly has been a great month for Allkem Ltd (ASX: AKE) shares.
Since this time in April, the lithium minerâs shares have hurtled 28% higher to close yesterdayâs session at $14.79.
This has been driven largely by news that the company plans to merge with fellow lithium giant Livent Corp (NYSE: LTHM).
Where next for Allkem shares?
The good news is that one leading broker believes there are more gains to come for investors. Thatâs despite its analysts suggesting that Allkem shareholders might not be getting the better end of the deal.
According to a note out of Bell Potter, its analysts have retained their buy rating with a $19.20 price target. This implies potential upside of 30% for Allkem shares over the next 12 months from current levels.
What did the broker say?
As I mentioned above, the broker feels that Livent shareholders are the big winners from the merger agreement. It said:
Longer term, we donât believe AKE shareholderâs ownership of NewCo (56%) reflects the companyâs stronger earnings profile and dominant upstream position. While we donât see it as a bad deal for AKE, it looks like a great deal for LTHM through strengthening its upstream capabilities, retaining key executive positions and receiving what we view as a disproportionately large share of NewCo.
Nevertheless, Bell Potter remains positive enough to maintain its buy rating. Particularly given how the US listing is likely to result in a valuation re-rating. It concludes:
AKE is now in-play; we think it is likely the LTHM merger will proceed and are not confident that an interloper will emerge. On a stand-alone basis the company has a strong production and earnings growth profile into what we expect to be an exceptionally strong market for lithium. Combining with LTHM and the NYSE listing could see an earnings multiple uplift. AKE is trading at a slight discount to the implied deal value, which we expect will close if deal certainty improves.
The post Own Allkem shares? Are you getting a good deal or is Livent the big winner from the merger? appeared first on The Motley Fool Australia.
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More reading
- Are ASX 200 lithium shares approaching a âtipping pointâ for ripper revenues?
- ASX 200 lithium shares: ‘A great opportunity to buy into weakness’?
- Is a slice of Livent worth holding onto Allkem shares?
- 5 things to watch on the ASX 200 on Tuesday
- Brokers name 3 ASX shares to buy now
Motley Fool contributor James Mickleboro has positions in Allkem. 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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