Top broker values Mineral Resources rumoured lithium spin-off at $17 billion

The Mineral Resources Limited (ASX: MIN) share price was out of form on Friday.

The mining and mining services company’s shares tumbled 5% lower to $66.39.

This was driven by a broad market selloff, which was felt hardest among riskier assets.

Is this Mineral Resources share price weakness a buying opportunity?

One leading broker that certainly sees this share price weakness as a buying opportunity is UBS.

According to a note, the broker has retained its buy rating and $83.00 price target on the company’s shares.

Based on the current Mineral Resources share price, this implies potential upside of 25% for investors over the next 12 months.

But it could get even better.

What else is the broker saying?

There has been a lot of speculation this month about Mineral Resources potentially unlocking value by demerging its lithium operations and listing them on Wall Street.

UBS has been looking into this option and appears to like what it sees. Its analysts note that Albemarle’s lithium business trades at 10x FY 2024 EBITDA, whereas Mineral Resources’ business is fetching just over 3x FY 2024 EBITDA.

And while UBS doesn’t necessarily think that the business will be able to command as great a premium as Albemarle, it still sees 6x EBITDA as possible. The broker commented:

While the case for MIN’s lithium spinoff to create value is strong, we believe ALB’s Li business arguably should trade at a premium to MIN.

If the business were to trade at 6x FY 2024 EBITDA, it would give it a valuation of $17 billion. That is notably more that the current Mineral Resources market capitalisation of $13 billion, which includes far more than just its lithium operations.

However, as things stand, management has not announced plans to spin off the business, so it is purely speculation at this stage. But with this much value potentially being unlocked from doing so, shareholders will no doubt be hoping it happens.

The post Top broker values Mineral Resources rumoured lithium spin-off at $17 billion appeared first on The Motley Fool Australia.

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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.

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