Category: Stock Market

The National Australia Bank Ltd (ASX: NAB) share price was sluggish this week amid news more than 100 activist groups reportedly signed a letter to the bank and other investors in a controversial Canadian gas pipeline.

The letter was penned by leaders of the Wet’suwet’en nation.

It calls for investors to remove TC Energy‘s Coastal GasLink from their loan books, claiming the pipeline violates the United Nations Declaration on the Rights of Indigenous People.

According to BankTrack, NAB lent approximately $127 million to the Coastal GasLink in April 2020.

As of Friday’s close, the NAB share price is $28.86. That represents a dip of 0.1% over Friday’s session and a 0.7% gain for the week.

For context, the S&P/ASX 200 Index (ASX: XJO) also gained 0.7% over the week just been.

Let’s take a closer look at the controversies surrounding the 670-kilometre gas pipeline.

NAB faces calls to divest Coastal GasLink

The NAB share price ended the week in the green by the skin of its teeth. Meanwhile, activist groups are reportedly backing the Wet’suwet’en nation’s calls for financiers, including NAB, to divest the Coastal GasLink.

On Friday, The Age reported activist groups including Greenpeace, Friends of the Earth, Market Forces, and BankTrack have all signed the letter penned by the leaders of the Wet’suwet’en nation, stating:

We are responsible for decisions regarding our land, and the decision of TC Energy to construct the Coastal GasLink pipeline without our consent is an infringement of our title and rights…

We call on you to divest and withdraw investment in the Coastal GasLink pipeline immediately. Furthermore, continued investment in this project is in open violation of Wet’suwet’en, Canadian, and international law. In no way is Coastal GasLink a responsible, profitable, secure, or morally sound investment.

The letter states the Wet’suwet’en nation didn’t consent for the pipeline to be built on its land. It also said the pipeline will result in damage to archaeological heritage sites.

Finally, it claims the Coastal GasLink is a bad investment with a high chance of becoming a stranded asset:

We believe the financial case for… Coastal GasLink is weakening and the scant local economic benefits, particularly in the long term, are dwindling.

NAB share price snapshot

The activist activity likely didn’t affect the NAB share price last week. It managed to scrape in a gain of just 0.7% over the course of the week.

That leaves it with a year-to-date gain of 25%. It is also 47% higher than it was this time last year.

The post Own NAB (ASX:NAB) shares? Here’s how the bank upset activists this week appeared first on The Motley Fool Australia.

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• NAB (ASX:NAB) share price nudges 2-year, post-COVID high
• What is the outlook for the NAB (ASX:NAB) share price?
• Analysts rate these 2 ASX dividend shares as buys
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Motley Fool contributor Brooke Cooper 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 Bruce Jackson.

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Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that investors might want to hear about are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

A2 Milk Company Ltd (ASX: A2M)

According to a note out of Credit Suisse, its analysts have retained their underperform rating and $5.50 price target on this infant formula company’s shares. Credit Suisse feels that the market is mispricing A2 Milk’s shares. Its analysts highlight that the lofty multiples its shares trade on are normally reserved for growing companies in growth sectors. It doesn’t feel that A2 Milk and the maturing Chinese infant formula market tick these boxes. The A2 Milk share price ended the week at $6.89.

Megaport Ltd (ASX: MP1)

A note out of Ord Minnett reveals that its analysts have retained their sell rating and $15.00 price target on this network as a service provider’s shares. This follows the release of a first quarter update that was largely in line with the broker’s expectations. One thing that the broker appears concerned about is Megaport’s rising costs. It notes this is due to its sales and marketing investment and costs relating to the new Megaport Virtual Edge. In light of this, the broker isn’t in a rush to change its rating. The Megaport share price was fetching $17.55 at Friday’s close.

Wesfarmers Ltd (ASX: WES)

Analysts at Citi have retained their sell rating and $49.00 price target on this conglomerate’s shares. According to the note, Wesfarmers delivered an annual general meeting update that was in line with expectations. In light of this, the broker hasn’t seen any reason to change its rating and continues to believe that the company’s shares are overvalued at the current level. The Wesfarmers share price ended the week at $57.31.

The post Top brokers name 3 ASX shares to sell next week appeared first on The Motley Fool Australia.

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• Brokers name 3 ASX shares to buy today
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• Megaport (ASX:MP1) share price slides on record growth
• Top brokers name 3 ASX shares to sell today

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. owns shares of and has recommended MEGAPORT FPO. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended A2 Milk and MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) has given investors a fairly solid performance over the past month.

Since 24 September, the ASX 200 has returned roughly 1% in capital growth, rising from 7,342.6 points to the 7,415.5 points it closed at on Friday. One ASX 200 share that’s beaten this performance is the Woolworths Group Ltd (ASX: WOW) share price.

Over the same period, Woolworths shares have lifted from $39.29 apiece to Friday’s close of $40.29 per share. That’s a healthy rise of 2.55%, more than double the broader ASX 200. But before all of you Woolies shareholders pop the champagne, here’s a fact that might stick in the craw.

Not to be beaten by its arch-rival Woolies, the Coles Group Ltd (ASX: COL) share price has done one better. Coles shares are up an impressive 5.22% over the same period, going from $17.06 a share on 24 September to Friday’s close of $17.95. That’s double what Woolies shares have managed.

So why has Coles comprehensively outperformed its rival Woolworths?

Why has the Woolworths share price lost out to Coles?

Well, it’s not exactly clear. There hasn’t been much in the way of major news or announcements out of either company in the past month.

However, there have been a number of developments that might give us some hints.

Firstly, let’s talk about Coles’ CEO. Stephen Cain came out a fortnight ago and told investors that Coles was expecting “a record Christmas” in 2021. As my Fool colleague Tristan covered at the time, Cain stated that “there’s $100 billion extra sitting in people’s bank accounts. We expect a fair share of that to be spent on food and drink”.

There has been no such optimism coming out of Woolworths though, so perhaps investors have acted accordingly.

Another thing to note is the pointed opinions on Coles shares from expert investors. As my Fool colleague James covered earlier this month, broker Morgans is ultra-bullish on Coles shares right now, giving the supermarket giant a 12-month share price target of $19.80. That implies a future potential upside of 10.3% over the coming 12 months.

Experts take their share pick

In contrast, there is arguably less optimism for Woolies shares at their current level. We also recently covered brokers’ opinions on Woolworths, with my colleague noting that “most brokers don’t think Woolworths is a buy right now, with several price targets around the $40 mark”. One in particular, Credit Suisse, reckons Woolies shares could drop as low as $31 a share over the next 12 months. That would be a loss of more than 23%.

This divided expert opinion might have been weighing on investor minds over the past month or so.

At a purely fundamental basis, Woolworths shares are also more expensive than Coles right now. That’s just going off of the price-to-earnings (P/E) ratio metric. At the last pricing, Woolworths shares had a P/E ratio of 33.01, while the Coles share price only commands a P/E ratio of 23.84.

It might be a combination of all of these factors that have led to Coles shares outperforming Woolworths over the month just gone. At the last Woolworths share price, this company has a market capitalisation of $48.83 billion, and a dividend yield of 2.68%.

The post Why is the Woolworths (ASX:WOW) share price underperforming Coles lately? appeared first on The Motley Fool Australia.

More reading

• Is Coles (ASX:COL) a must-buy dividend share for income investors?
• Own Woolworths (ASX:WOW) shares? Here’s why the company is in the news
• Why this supermarket is outperforming the Woolworths (ASX:WOW) share price lately
• Woolworths (ASX:WOW) share price edges lower following share buy-back completion
• Own Woolworths (ASX:WOW) shares? Here’s how the retail giant is using AI to combat self-serve cheats

Motley Fool contributor Sebastian Bowen 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 owns shares of and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Betashares Asia Technology Tigers ETF (ASX: ASIA) might be one of the more interesting exchange-traded funds (ETF) to think about.

The purpose of this ETF is to give investors access to technology companies that are listed in Asia, outside of Japan.

There are a few different things to think about this potential investment:

Diversification

The ASX doesn’t have a lot of large technology businesses in its ranks. A lot of the ASX are also focused on certain industries like commodities and banking.

Betashares Asia Technology Tigers ETF gives diversification in multiple ways for potential investors.

There are a few different countries that are represented within the portfolio: China (making up 44.9% of the allocation), Taiwan (26.2%), South Korea (18.2%) and India (7.5%).

There are numerous technology sectors that investors can get exposure to through this ETF.

The ones that have sizeable positions include: internet and direct marketing retail (25.2%), semiconductors (20.9%), interactive media and services (17.4%), tech hardware, storage and peripherals (11.2%), interactive home entertainment (10%) and IT consulting and other services.

Growth-focused businesses

BetaShares says that due to its younger, tech-savvy population, Asia is surpassing the West in terms of technological adoption and the sector is anticipated to remain a growth sector.

Looking at the 50 businesses in this tech portfolio, there are some large and growing ones like: Taiwan Semiconductor Manufacturing, Tencent, Samsung Electronics, Alibaba, Meituan, Sea, JD.com, Infosys, Pinduoduo and Netease.

Past performance is no guarantee of future performance. However, the returns of Betashares Asia Technology Tigers ETF has shown how quickly the group of businesses have been growing. Over the last three years, the ETF has achieved an average return per annum 19.4%.

Potentially cheaper than western counterparts

Asian businesses typically have lower valuations than some of the biggest US tech companies.

BetaShares says that Betashares Asia Technology Tigers ETF has a forward price / earnings ratio (p/e ratio) of around 20.

Looking at one of the other ETFs that BetaShares offers is Betashares Nasdaq 100 ETF (ASX: NDQ), which is a tech-heavy portfolio of US shares with names like Apple, Microsoft, Amazon, Tesla, Alphabet, Facebook, Nvidia, PayPal and Adobe.

The Betashares Nasdaq 100 ETF has a forward price/earnings ratio of almost 27.

Concerns about China’s economy

However, whilst there are compelling reasons to consider this ETF. It may also be worth noting that the Chinese economy is coming under focus with concerns about Chinese real estate developers – particularly Evergrande – and factoring in what that would mean if there was a flow-on effect to other businesses and other parts of the economy.

The post Why Betashares Asia Technology Tigers ETF (ASX:ASIA) could be a good investment appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS and BetaShares Asia Technology Tigers ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Owners of Flight Centre Travel Group Ltd (ASX: FLT) shares will likely be glad to learn Australians are booking more international holidays than domestic trips for the first time since the pandemic began.

The company is still haemorrhaging around $40 million each month. However, the company’s CEO Graham Turner flagged an uptick of interest in overseas travel.

At the company’s annual general meeting (AGM) on Wednesday, he commented: “The Australian reopening plan has sparked a flurry of activity and created a genuine buzz, leading to a significant uplift in leisure enquiry and quotes in recent weeks.”

Over the past week, the Flight Centre share price plummeted 10%. It finished Friday’s session trading at $20.29.

Let’s take a closer look at the boss of Flight Centre’s optimism.

Buckle up for a return to travel

Flight Centre shares might be in for a rebound soon, as international travel looks to be gearing up to do the same.

Turner told the company’s AGM the number of bookings to Fiji placed through Flight Centre’s Ignite business this month is in line with the amount made in October 2019.

Additionally, Australian interest in travelling to the United Kingdom, United States, and Fiji has increased by multiples of 6, 11, and 20 respectively over the last month.

As The Motley Fool Australia reported on Wednesday, sales through the company’s leisure and corporate travel arms are at 14% and 41% of pre-COVID levels respectively. Those figures need to reach 50% and 40% respectively before the company expects to break even.

Though, Turner believes that will be sooner rather than later. While he declined to give guidance, he commented that he expects the company will return to profitability this financial year.

He said in the post-COVID world, more people will likely seek out travel agents instead of going it alone.

Turner also said Flight Centre is a leaner, more efficient business than it was before the pandemic. That means it’s ready to respond to changes in the cycle quickly.

Finally, Flight Centre experienced a surge in demand when international borders reopened in the United States and South Africa. For that reason, it’s getting ready to see the same activity in Australia.

It’s now returning sales staff to full-time roles, creating ‘COVID support desks’, and enhancing its sales channels to reduce pressure on shop fronts.

Flight Centre share price snapshot

This week started off well for Flight Centre’s stock. Monday and Tuesday saw the Flight Centre share price gaining. Unfortunately, it took a turn for the worst and plummeted 4% on Wednesday and another 5% on Thursday.

It finished the week with a year-to-date gain of 26%.

The post Own Flight Centre (ASX:FLT) shares? The company is still bleeding cash, but it’s not all bad news appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper 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 recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Owners of Afterpay Ltd (ASX: APT) shares might want to keep an eye on the big four banks as they edge closer into the buy now, pay later (BNPL) provider’s space.

This week, Westpac Banking Corp (ASX: WBC) brought out its own BNPL-esque offering.

Westpac’s new offering, named Flex, is aimed at a younger market wanting smaller bites of interest free debt. It adds to the list of emerging big-bank BNPL services.

As of Friday’s close, the Afterpay share price is $126. That’s 0.2% lower than it was at the end of Thursday’s session but 2.6% higher than it ended the week before.

Let’s take a closer look at Afterpay’s increasing competition from big banks.

Is this the next challenge facing Afterpay shares?

The Afterpay share price performed well last week despite the announcement of a new competitor.

Westpac’s Flex is a zero-interest credit card. It gives users access to $1,000 of credit at a flat monthly rate of $10. Notably, the $10 fee will only be charged to users who don’t pay off the previous month’s charges on time.

The application process for Flex will be entirely online. A digital card will be available minutes after a person’s application is approved.

Flex is expected to be launched by the end of the year. According to Westpac, it might come just in time.

The bank has found that 53% of gen Zs, 48% of millennials, 32% of Gen Xs, and 21% of Baby Boomers think traditional credit cards are losing their relevance.

Westpac’s Flex adds to the increasing list of big banks moving into the BNPL and interest fee credit spheres.

Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd (ASX: NAB) both have similar offerings, respectively named Neo and StraightUp Card.

CBA also has a BNPL offering named StepPay and broke into Afterpay’s future purchaser, Square Inc‘s (NYSE: SQ) space this week with the launch of its Smart terminal.

Right now, Afterpay shares are trading for 5% more than they were at the start of 2021. They’ve also gained 23% since this time last year.

The post Own Afterpay (ASX:APT) shares? Here’s how the big banks are honing in on the BNPL sector appeared first on The Motley Fool Australia.

More reading

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• Afterpay (ASX:APT) and other BNPL shares in focus as RBA looks to rein in regulation
• What’s happening with the CBA (ASX:CBA) share price this week?
• Own Westpac (ASX:WBC) shares? Here’s how the bank plans to compete with Afterpay
• NAB (ASX:NAB) share price nudges 2-year, post-COVID high

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO and Square. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Are you looking for some dividend options for your portfolio in October? Then check out the two ASX shares listed below.

Here’s why these ASX dividend shares have been tipped to as buys this month:

Centuria Industrial Reit (ASX: CIP)

The first dividend share that income investors might want to take a look at is Centuria Industrial. This industrial focused property company has built a portfolio of quality assets aiming to deliver income and capital growth for investors.

It has also just added to this portfolio with the acquisition of eight freehold urban infill industrial assets for $351.3 million. This acquisition expands Centuria Industrial’s exposure across attractive industrial sub-sectors. These include distribution centres, cold storage, and transport logistics.

One broker that was pleased with the acquisition was Macquarie. In response to the deal, the broker retained its outperform rating and lifted its price target to $4.22.

As for dividends, Macquarie is forecasting a 17.3 cents per share distribution in FY 2022 and an 18.4 cents per share distribution in FY 2023.

Based on the current Centuria Industrial share price of $3.75, this will mean yields of 4.6% and 4.9%, respectively.

Suncorp Group Ltd (ASX: SUN)

Another dividend share to look at is Suncorp. It helps Australians build their futures and protect what matters by offering insurance, banking, and wealth products and services through some of Australia and New Zealand’s most recognised financial brands. These include AAMI, Apia, Bingle, GIO, Shannons, Vero, and the eponymous Suncorp brand.

One top broker that is very positive on the company is Goldman Sachs. It currently has a buy rating and $13.74 price target on its shares.

In addition, Goldman is forecasting attractive dividend payments in the coming years. It has pencilled in fully franked dividends per share of 61 cents in FY 2022 and 73 cents in FY 2023.

Based on the current Suncorp share price of $12.30, this will mean yields of 5% and 5.9%, respectively.

The post 2 buy-rated ASX dividend shares for next week 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 Bruce Jackson.

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Luckily for income investors, the Australian share market is home to a good number of quality dividend shares. One of those is Coles Group Ltd (ASX: COL).

Why buy Coles’ shares?

Since GJ Coles opened his first store in Collingwood, Victoria in 1914, Coles has gone on to become one of Australia’s most recognisable brands and one of the big two players in the supermarket industry with a network of over 800 locations across the country. In addition to this, Coles has an equally large liquor store and express store network.

This gives the company extraordinarily defensive qualities, which have been on display for all to see during the pandemic. For example, in FY 2021, Coles delivered a 3.1% increase in sales to $38,562 million and a 7.5% jump in net profit after tax to $1,005 million despite cycling panic buying in parts of FY 2020.

The good news is that the company still sees plenty of room to grow its footprint further and also its online business. Combined with its focus on automation, this is expected to underpin solid earnings and dividend growth over the 2020s.

In the meantime, the team at Morgans expect Coles to pay fully franked dividends of 61 cents per share in FY 2022 and then 62 cents per share in FY 2023. Based on the current Coles share price of $17.95, this represents yields of ~3.4% for both years.

Another positive is that the broker sees decent upside in the Coles share price at the current level.

Morgans currently has an add rating and price target of $19.80. This implies a potential return of 10.3% over the next 12 months, which stretches to almost 14% if you include dividends.

All in all, this could make the Coles share price a decent option for income investors next week.

The post Is Coles (ASX:COL) a must-buy dividend share for income investors? 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 owns shares of and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Airtasker Ltd (ASX: ART) share price may be worth thinking about because the business could have a lot of growth potential.

What is Airtasker?

For readers that don’t know what Airtasker is, it’s a platform business that connects people who are ready to work with people who need work to get done.

It offers a wide range of tasks, such as home cleaning, handyman jobs, admin work, photography, graphic design or building a website.

With that in mind, here are some reasons why the Airtasker share price could be one to think about:

Rapid growth

A business that is growing revenue quickly over several years gives itself more chance to deliver good returns to shareholders.

In FY21 alone, it saw 38% revenue growth to $26.6 million. This beat the prospectus guidance of $24.5 million. Gross profit went up 39% to $24.8 million.

The last financial year also saw gross marketplace revenue (GMV) increase by 35% year on year to $153.1 million, beating the prospectus forecast of $143.7 million. Two years ago in FY19 its GMV was $93.2 million.

Underlying pro forma earnings before interest and tax (EBIT) grew by 57.2% to a loss of $2.2 million.

Very strong margins

The ASX share says that its user-aligned business model and light touch operations deliver strong gross profit margins.

In FY21 it saw a gross profit margin of 93%. Not many ASX shares have gross margins above 90%. Within that gross margin, 4.9% was for payment costs and 2.1% of insurance costs.

When a business has such a high gross profit margin, it means that a lot of the new revenue can fall straight to the next line of profit. This could be helpful for driving the Airtasker share price higher if underlying profit can grow.

Already cashflow positive

Lots of technology businesses list onto the ASX with outflows of operating cashflow as they spend for growth until scale allows them to reach breakeven.

However, Airtasker achieved positive operating cashflow of $5.5 million in FY21, beating its prospectus forecast of $0.1 million.

Management said that with positive operating cashflow and a strong cash balance, it is well positioned to invest in international expansion.

Global growth potential

International growth could help the Airtasker share price climb over time.

The business is already making progress overseas. In FY21, the UK marketplace saw GMW growth of 232% year on year and growth of 93% quarter on quarter.

In the US, it said that the Zaarly integration and US expansion planning was progressing well. It is aiming to start in the cities of Kansas City, Dallas and Miami.

It’s hoping to reach an international annualised run rate of GMV of between $8 million to $10 million by June 2022.

Airtasker thinks that its total addressable market is many billions of dollars across Australia, the US and UK for existing local service industries. It wants to grow new services like flatpack furniture assembly and date night planning to complement existing services like cleaning, photography and office administration.

In FY22, it’s targeting revenue of at least $35 million and GMV of at least $200 million.

The post Here’s why the Airtasker (ASX:ART) share price could be a buy appeared first on The Motley Fool Australia.

More reading

• Why is the Airtasker (ASX:ART) share price climbing on Wednesday?
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Airtasker Limited. 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 Bruce Jackson.

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One of the best large cap performers in the resources space this year has been the South32 Ltd (ASX: S32) share price.

Since the start of the year, the mining giant’s shares have risen a sizeable 52%.

This is almost five times greater than the return of the S&P/ASX 200 Index (ASX: XJO).

Could the South32 share price hit $4.50 by Christmas?

Given the impressive run that the South32 share price is on, investors may be wondering just how high it can climb.

Well, the good news is that one leading broker still sees plenty of upside ahead for the company’s shares.

According to a note out of Goldman Sachs this week, its analysts have retained their conviction buy rating and $4.40 price target on its shares.

Based on the current South32 share price of $3.80, this implies potential upside of approximately 16% for investors.

But it gets even better. Goldman believes that South32’s shares will provide investors with a fully franked 11% dividend yield in FY 2022. This brings the total potential return to 27%. Not bad considering its shares are already up 52% this year.

Based on the above, the team at Goldman Sachs appear to see scope for the South32 share price to be trading in or around the $4.50 mark by Christmas.

What did it say?

There are a few reasons why Goldman is bullish on the mining giant.

It explained: “1. Valuation: The stock is trading at c. 1x NAV (A$3.88/sh) excluding [the recently announced copper acquisition of] Sierra Gorda.

2. Strong FCF outlook: We forecast a FCF yield of c. 15% in FY22 & FY23 (over 20% at spot), driven mostly by exposure to base metals (aluminium & alumina c. 50% of FY22 EBITDA, zinc/nickel c. 20%).

“3. Increased capital returns: We assume the buyback continues to be extended (at US$250mn p.a) and S32 continues to pay out 70% of earnings (40% ordinary, 30% special dividend component). On our estimates, S32 is on a dividend yield of c. 11-12% in FY22 & FY23.”

In addition, the broker notes that there’s positive newsflow on the horizon that could be a catalyst to driving the South32 share price higher.

Goldman commented:: “We would see the commitment to the restart of the Alumar aluminium smelter as a positive (c. 6% upside to EBITDA), and highlight the potential for capex on the US$800mn Dendrobium next domain (DND) met coal project to be reduced (which we would view as a positive), S32 is currently selling a base metal royalty portfolio (no value in our model), and is due to release the PFS results from the Hermosa zinc/silver/lead project (GS NPV US$1.1bn) in Arizona in Nov/Dec.”

The post Could the South32 (ASX:S32) share price reach $4.50 by Christmas? appeared first on The Motley Fool Australia.

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• Broker forecasts South32 (ASX:S32) dividend yield of 11% until 2026

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 Bruce Jackson.

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