Tag: Motley Fool

Core Lithium Ltd (ASX: CXO) shares are having a very strong finish to the week.

In morning trade, the lithium miner’s shares are up 12% to 23.5 cents.

What’s going on with Core Lithium shares today?

Investors have been scrambling to buy the company’s shares this morning despite there being no news out of it.

However, it is worth noting that Core Lithium isn’t the only ASX lithium share that is recording a strong gain today. Here’s a quick summary of some of the movers and shakers in the industry on Friday:

• Arcadium Lithium (ASX: LTM) shares are up 8%
• Lake Resources N.L. (ASX: LK) shares have also jumped 8%
• Liontown Resources Ltd (ASX: LTR) shares are up 4%
• Piedmont Lithium Inc (ASX: PLL) shares have surged 9%
• Pilbara Minerals Ltd (ASX: PLS) shares are up 4%
• Vulcan Energy Resources Ltd (ASX: VUL) shares are 6% higher

Why are ASX lithium shares rising?

Today’s gains by Core Lithium’s shares appears to have been driven by a strong night for lithium stocks on Wall Street overnight.

This saw Sociedad Quimica y Mineral de Chile SA (NYSE: SQM) shares jump 8% and Albemarle Corporation (NYSE: ALB) shares rise 4.5%.

The driver of these gains was news that the lithium carbonate price in China climbed to its highest level in almost three months.

According to Reuters, the July lithium carbonate contract jumped as much as 7.5% to 112,250 yuan (US$15,592.66) per metric tonne. This is its highest level since 11 December.

Investors appear to believe that this could be a sign that lithium prices have now bottomed and are on the road to recovery.

However, it is worth noting that SQM has just announced that it plans to push ahead with its lithium expansions despite the market being oversupplied. So, investors may want to keep an eye on lithium prices in the coming weeks and months to see if this is just a temporary recovery or something more sustainable.

The post Why are Core Lithium shares jumping 12% on Friday? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why are ASX lithium shares like Liontown having such a bumper session today?
• Why are Core Lithium shares taking another tumble on Wednesday?
• Should you buy Pilbara Minerals shares today?
• These are the 10 most shorted ASX shares

Motley Fool contributor James Mickleboro owns Arcadium Lithium shares. 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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The Ampol Ltd (ASX: ALD) share price is taking a tumble today.

Shares in the S&P/ASX 200 Index (ASX: XJO) energy stock closed yesterday trading for $39.40. In morning trade on Friday, shares are swapping hands for $37.31 apiece, down 5.3%.

For some context, the ASX 200 is up 0.3% at this same time, charging into new record territory.

Here’s what’s happening with Ampol today.

Why is the Ampol share price underperforming on Friday?

The Ampol share price is pulling back from the new all-time closing highs the company posted earlier this week.

Most, if not all, of the selling pressure stems from the fact that the stock is trading ex-dividend today.

That means investors buying shares today will no longer be eligible to receive the record-high dividend management declared when the company reported its full-year results on Monday. When a stock trades ex-dividend, you’ll generally find its share price under some extra pressure on the day.

Ampol’s supersized high dividend was fuelled by a boost in 2023 earnings and a strong balance sheet. This saw the ASX 200 energy stock deliver a fully franked final dividend of $1.20 per share and a special dividend of 60 cents per share.

That equates to a fully franked final dividend of $1.80 per share, up 16% from 2022’s final payout.

Looking at the Ampol share price moves this morning, if we were to add that $1.80 back in then the share price would be down less than 1%. And remember, that $1.80 comes with full franking credits.

Commenting on the company’s yearly performance on Monday, Ampol CEO Matt Halliday said, “The result reinforces the adaptability and resilience of Ampol’s integrated supply chain in what was another year where energy markets moved rapidly in response to geopolitical events.”

Atop the final dividend, Ampol paid an interim dividend of 95 cents per share for a full-year payout of $2.75 per share.

At the current Ampol share price, this equates to a fully franked trailing yield of 7.4%.

The post Why is the Ampol share price tumbling 5% on Friday? appeared first on The Motley Fool Australia.

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More reading

• How I’d invest $250 a month in ASX dividend shares to target a $24,000 annual second income
• Looking to bank the record Ampol dividend? Time is running out!
• 25 ASX 200 shares with ex-dividend dates next week
• 1 ASX 200 dividend stock I’m buying for superior passive income in 2024
• How these 4 ASX 200 shares just gained major broker upgrades

Motley Fool contributor Bernd Struben 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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Syrah Resources Ltd (ASX: SYR) shares are catching the eye on Friday.

In morning trade, the ASX battery materials share is up 14% to 69.5 cents.

Why is this ASX battery materials share jumping?

Investors have been snapping up the company’s shares today after it announced a binding long-term offtake agreement with Posco Future M for Balama natural graphite product.

Posco Future M (previously Posco Chemical) is a major battery materials business, producing cathode active materials and active anode material (AAM).

According to the release, the six-year agreement is for up to 2kt per month (24kt) in the year following commissioning. After which, it will increase to from 2kt per month (24kt per annum) to 5kt per month (60kt per annum) at the option of Posco Future M with at least six months’ notice, from the second year to the end of the term.

Management believes that the offtake agreement is an important development in the company’s sales strategy. It will transition Balama natural graphite sales to a more geographically diversified and commercially aligned customer base, which it believes highlights Syrah’s unique position in natural graphite and AAM supply outside of China.

More to come?

The deals may stop there. The ASX battery materials share revealed that there is increasing interest from battery manufacturers and auto OEMs in directly contracting sustainable upstream supply of ex-China natural graphite for anode processing partners.

It is currently negotiating further Balama natural graphite commercial supply arrangements with anode processing and downstream companies.

Things are starting to look up for this beaten down ASX battery materials share. Though, its shares still have a long way to go to get into positive territory on an annual basis.

Over the last 12 months, the Syrah share price is down approximately 65%.

The post Guess why this ASX battery materials share is surging 14% today appeared first on The Motley Fool Australia.

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More reading

• These are the 10 most shorted ASX shares
• These are the 10 most shorted ASX shares
• These are the 10 most shorted ASX shares
• 3 ASX All Ordinaries shares rocketing over 10% today
• These are the 10 most shorted ASX shares

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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The Life360 Inc (ASX: 360) share price is rocketing on Friday.

In early trade, the location technology company’s shares are up 24% to a 52-week high of $10.13.

This follows the release of its FY 2023 results this morning.

Life360 share price rockets after smashing earnings guidance

• Revenue up 33% to US$305 million
• Subscription revenue up 52% to US$200 million
• Adjusted EBITDA of US$20.6 million
• Net loss of US$28.2 million
• Cash and equivalents of US$70.7 million

What happened during the year?

For the 12 months ended 31 December, Life360 reported a 33% increase in revenue to US$305 million. This was in the middle of its guidance range of US$300 million to US$310 million.

A key driver of this growth was its core Life360 subscription revenue, which came in at US$200 million. This was up 52% year on year and ahead of guidance for a ~50% increase.

Underpinning its subscription growth was a 21% increase in Global Paying Circles to 1.8 million and significant price increases. Management believes this underscores the value its subscribers perceive in Life360’s services.

Global monthly active users (MAU) grew nearly 13 million or 26% to 61.4 million in FY 2023. This was driven by its ongoing investment in its core location sharing experience. International MAU grew 7 million or 40% to 24.6 million after the company increased the speed and responsiveness of its app. This meant it achieved international feature parity with the U.S.

The highlight of the result was arguably Life360’s adjusted EBITDA. It was US$20.6 million for the year, which was comfortably ahead of its guidance range of US$12 million to US$16 million.

And while the company recorded a net loss of US$28.2 million, this was a massive US$63.5 million improvement from FY 2022.

Also improving materially was Life360’s operating cash flow, which came in at US$7.5 million. This is a US$64.6 million improvement versus FY 2022. At the end of the period, the company had cash and equivalents of US$70.7 million. This is up from US$63.7 million at the end of the third quarter.

Management commentary

Life360’s co-founder and CEO, Chris Hulls, was delighted with the year. He said:

We are incredibly proud that more than 61 million monthly active users (MAU) globally enjoy the peace of mind that comes with the location sharing and safety features of Life360. In CY23 we made significant strides in our member experience, showing our users what their family members are up to, whether they’re driving, walking or biking. We put pets and other valuables on the map with Tile, all in the service of our mission to keep people close to the ones they love.

At the same time we made meaningful progress on our path to profitability as we significantly reduced our net loss, and achieved a major milestone by delivering our first full year of positive Adjusted EBITDA and Operating Cash Flow. We are excited to continue building on our leading global position in location sharing, and see exciting opportunities in CY24 and beyond to broaden our reach and deepen engagement with our members.

Outlook

Life360 has provided its guidance for FY 2024 this morning.

It expects consolidated revenue of US$365 million to US$$375 million and adjusted EBITDA of US$30 million to US$35 million.

The midpoint of its guidance range implies revenue growth of 21% and adjusted EBITDA growth of 58%.

Commenting on the year ahead, Hulls said:

Looking forward to CY24, we are excited to announce the creation of a new advertising revenue stream that offers partners unparalleled reach to Life360’s enormous free user base, and more than 20 million daily active users (DAU) connecting with their families and friends. We have consistently spoken of the potential that our investment in the core user experience, and the scaling of our MAU base, would provide for the future. We are encouraged by the success of early testing and see the opportunity to deliver an attractive platform to advertisers, while continuing to provide a great user experience.

The Life360 share price is up $4.72 over the last 12 months.

The post Life360 share price rockets 24% after smashing FY23 earnings expectations appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• 3 no-brainer ASX shares to buy under $30
• Own Life360 shares? Here’s your FY23 results preview
• Here are the top 10 ASX 200 shares today
• Brokers say these explosive ASX growth shares are buys with massive upside

Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. 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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BHP Group Ltd (ASX: BHP) shares are rising on Friday morning.

In early trade, the mining giant’s shares are up 0.5% to $44.16.

Why are BHP shares rising?

Today’s gain appears to have been driven largely by a positive showing on Wall Street overnight for its NYSE listed shares.

In addition, there has been some news out of the miner this morning which may have gone down well with investors.

Given its size and prestige, the Big Australian has historically been able to attract high quality names to its board.

This remains the case today, with the company announcing the addition of the CEO of a big four bank to its boardroom.

Who has been appointed?

According to the release, National Australia Bank Ltd (ASX: NAB) CEO Ross McEwan CBE will join BHP as a non-executive director with effect from 3 April 2024.

This coincides with McEwan’s exit from NAB on 2 April when he will be replaced by Andrew Irvine.

BHP highlights that NAB’s outgoing CEO has significant executive experience, including in the financial services industry, with expertise in capital allocation, risk management, and complex regulatory environments.

As well as being the CEO of NAB from 2019 to April 2024, he was group CEO of the Royal Bank of Scotland from 2013 to 2019, and held executive roles at Commonwealth Bank of Australia (ASX: CBA).

Commenting on the appointment, BHP’s chair, Ken MacKenzie, said:

We are delighted to announce that Ross McEwan will join BHP. Ross brings a strong focus on people and culture, technology and innovation and has deep experience in capital allocation and value creation. Ross has worked closely with a wide range of stakeholders, including customers, governments and regulators and brings a global perspective. He has a deep understanding of organisational transformation and brings a very strong focus on the customer and technology as a driver of change. We look forward to welcoming Ross to the Board on 3 April 2024.

The post Own BHP shares? Guess which star CEO just joined your board appeared first on The Motley Fool Australia.

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More reading

• One ASX mining sector at risk of more pain, and one ready to soar!
• How global job cuts could boost the BHP share price
• How come the NAB share price is still 26% below its all-time high?
• Why is the BHP share price trailing the ASX 200 on Tuesday?
• Here’s the BHP dividend forecast through to 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 Scott Phillips.

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There are plenty of ASX dividend stocks to choose from on the local market, but which ones could be buys in March?

Two shares that were recently identified as buys by analysts at Morgans are listed below. Here’s what its analysts are saying about them:

Bapcor Ltd (ASX: BAP)

Morgans thinks that this auto parts retailer could be an ASX dividend stock to buy. It has an add rating and $6.60 price target on its shares.

While the broker acknowledges that a change of management creates a bit of uncertainty, it believes its current valuation incorporates this. Morgans commented:

However, despite incurring mgmt and strategy change and a difficult cost environment, the business has been resilient. We think the valuation point continues to provide value on a medium-term view.

In respect to dividends, the broker is forecasting the company to pay 19.5 cents per share in FY 2024 and 23 cents per share in FY 2025. Based on the current Bapcor share price of $5.95, this implies dividend yields of 3.3% and 3.9%, respectively.

Dexus Convenience Retail REIT (ASX: DXC)

Another ASX dividend stock that could be a buy according to Morgans is Dexus Convenience Retail REIT. It is a convenience retail and service station property company.

The broker believes that the company’s shares are great value at current levels. So much so, last month it put an add rating and $3.23 price target on them. This implies almost 17% upside for investors from current levels.

As for income, the broker is expecting big dividend yields in the coming years. Morgans is forecasting dividends per share of 21 cents in both FY 2024 and FY 2025. Based on its current share price of $2.77, this implies yields of 7.6%.

The post Morgans says these ASX dividend stocks are buys appeared first on The Motley Fool Australia.

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More reading

• Analysts think these ASX 200 shares are dirt cheap buys
• These ASX dividend stocks could be top buys in March
• Bapcor share price resilient following record half year revenues
• 5 things to watch on the ASX 200 on Friday
• 2 ASX dividend shares to buy to supercharge your income

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 recommended Bapcor. 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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Before we start… would you like to attend a free one-hour online money and-investing Q&A with yours truly?

This week, we’ve been running a series of seminars under the banner of ‘Financial Literacy Week’, covering important financial topics like budgeting, eliminating debts, saving and investing.

Today is the last day. But no prior knowledge is necessary.

It’s going to just be a 60 minute Q&A session.

We’ve been collecting questions all week, and you can ask them live, during the webinar.

It’s running for an hour from 12.30pm AEDT, today. (Also, I’ve been told we have a very special offer. So yes, at the end I will be selling something, but it’s… cheap. By which I mean… cheap.

But you don’t have to buy anything to attend, and I won’t be doing a hard sell.

So, if you’d like to know more about it, reserve a spot, and sign up for a handy reminder email, just click here! See you at 12.30pm AEDT!

—–

So, Treasurer, can I fix the Superannuation and pension mess for you?

Yes, that’s a bold idea. Especially from someone who isn’t in the public service or politics.

But maybe that’s the point.

I’m not encumbered by electoral considerations, political ideology or ‘not invented here’ syndrome.

Nor do I have the weight of vested interests: donors, impacted businesses, or anything else.

So, while I don’t claim to have perfect insight, I have the benefit of physical and metaphorical distance.

First, though, let’s look at the mess: there are contribution limits, and catch-up limits. There’s preservation ages, transition to retirement, accumulation accounts and pension accounts. There’s indexing, minimum contributions… seriously, the thing is a dog’s breakfast. Then there’s the new two-tier tax approach introduced by the government, based on the size of the Super balance.

And then there are the disincentives. How much can you earn before losing the pension? How much can you leave in Super, to benefit your heirs? How can you use Super to save paying tax?

Why is this such a mess? Votes, mostly. Some ideology. And so many vested interests, there’s almost no-one to speak up against it.

But what if we weren’t subject to any of this? How could we change, and dramatically simplify, our ridiculously complex retirement system?

Because Super was a spectacularly good idea that’s been, well, bastardised by successive governments ever since. So fixing it should be a priority.

And it’s stupidly simple. Here’s how:

First, increase the tax-free threshold for over-67s by around $20,000.

Second, make all income (earned income, unearned income, the aged pension, and Superannuation incomes) taxable above that threshold, at marginal tax rates.

Third, mandate a larger minimum withdrawal (as a % of the current balance) from Super, so it can’t be used as an estate-planning tool.

Fourth? There isn’t one.

That’s literally it.

I would scrap the ridiculous tax dodge of ‘transition to retirement’ pension. And you could roll back the 30% tax rate on higher Superannuation balances, because my system would capture its taxation as income.

And the benefits? There are many:

– You wouldn’t need an accountant to work this stuff out.

– The government doesn’t lose a truckload of tax revenue when people use Super for estate planning or to earn an untaxed six-figure income.

– It ameliorates the cost of franking credit refunds to higher income earners, because their Super income would be taxed.

– It wouldn’t disincentivise working in retirement.

(It also opens up the option of giving everyone over 67 the aged pension, should we choose, as an alternative to raising the tax-free threshold, which would save a small fortune on administration and the frictional costs of people moving in and out of work.)

Why wouldn’t we do it? There’s no good reason.

Oh, people who are trying to use it as a tax shield would scream blue murder. And the accountants and financial planners might lose some business.

But that’s okay.

(I don’t dislike those people, by the way. They do a good job. It just shouldn’t be necessary to engage a financial planner to organise what otherwise should be a plain-vanilla retirement.)

It won’t happen, of course. For the reasons I outlined at the top. But it should. And a Treasurer (of either/any political stripe) would do it, if he or she started from first principles, with the national interest as the foremost objective.

(By the way, according to some numbers from the Super Members Council out this morning, the cost of raiding Super during COVID could be as high as $85 billion. I called it #RetirementWrecker at the time. And since. And I’m still calling it that, now. It might just have been the worst financial policy decision of my adult lifetime.)

It’s time to return Super to its original purpose, to remove the complexity and to stop it being used as a tax dodge.

Over to you, Treasurer.

Fool on!

The post A simple fix for Superannuation appeared first on The Motley Fool Australia.

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More reading

• These were the best performing ASX 200 shares in February
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Scott Phillips 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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A new month is here, so what better time to make some new additions to your portfolio.

But which ASX stocks could be top options in March? Well, one that has been named as a buy on Friday is tech stock Xero Ltd (ASX: XRO).

In fact, the broker has named the company as its “preferred ANZ Technology pick” this morning.

What is Goldman Sachs saying about this ASX tech stock?

Goldman was pleased with Xero’s inaugural investor day event and came away feeling even more positive on the company.

It has highlighted three key takeaways from the event:

(1) Xero is increasingly positive on its financial outlook, upgrading its use of the Rule of 40 from a ‘useful measure’ to having a formal aspiration to deliver rule of 40 or greater, alongside aspiring to double revenues; (2) The cadence of product releases (both announced and planned) has dramatically accelerated within the 3X3 over the last year (highlights include increase US bank feeds from ~20 to 600 in 12m, alongside launching US bill pay partnership and Just Ask Xero, the GenAI product announced today) – this supports further subscriber and ARPU growth for XRO; and (3) The strength and calibre of Xero’s global management team, which has undergone a significant change over the past year.

Buy rating reiterated

In response to the event, the broker has reiterated its buy rating with an improved price target of $152.00 (from $141.00).

Based on the latest Xero share price of $127.31, this implies potential upside of greater than 19% for the ASX tech stock over the next 12 months. Goldman concludes:

We see Xero as very well-placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$100bn TAM. Given the company’s pivot to profitable growth and corresponding faster earnings ramp, we see an attractive entry point into a global growth story with Xero our preferred large-cap technology name in ANZ – we are Buy rated.

The post Guess which ASX tech stock is Goldman Sachs’ top pick in March appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Xero share price falls despite strategy update and new AI solution
• 5 things to watch on the ASX 200 on Thursday
• 3 no-brainer ASX shares to buy under $30
• Leading brokers name 3 ASX shares to buy today

Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Xero. The Motley Fool Australia has positions in and has recommended Xero. 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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Are you wanting some exposure to the energy sector? If you are, then it could be worth checking out the two ASX energy shares listed below.

They have just been named as buys by analysts at Bell Potter. Here’s what the broker is saying:

Boss Energy Ltd (ASX: BOE)

The broker thinks that this uranium producer is a top option for investors looking for energy exposure.

It has speculative buy rating and $6.34 price target on its shares. This implies potential upside of 26% over the next 12 months.

It is bullish on the company due to the favourable outlook for uranium and its diversified revenue streams. The broker explains:

Uranium fundamentals continue to support our thesis being 1) advancement in Nuclear energy across the globe (60 reactors currently under construction) filtering through to a growing demand for U3O8 and 2) a lack of near-term supply as producers exited the market post Fukushima. The recent acquisition of a 30% interest in the Alta Mesa joint venture, diversifies BOE’s operations and revenue streams, making BOE one of only two geographically diversified uranium producers in CY24.

Strike Energy Ltd (ASX: STX)

Another ASX energy share that Bell Potter is bullish on is Strike Energy. It is an oil and gas producer, explorer, and developer.

Its analysts have a speculative buy rating and 32 cents price target on the company’s shares. This suggests potential upside of almost 50% for investors from current levels.

Bell Potter is feeling positive about the company due to its strong balance sheet and growth outlook. And while recent drilling at the West Erregulla project has been disappointing, this is now baked into its valuation. It said:

With Walyering coming online in 2023, STX is now a producer with cash flows and a strong balance sheet to support further growth at Walyering, appraisal of its Perth Basin acreage and ultimately develop the larger scale West Erregulla project. While recent results at South Erregulla have materially de-rated STX equity, our heavily risked valuation supports a Speculative Buy recommendation.

The post 2 ASX energy shares to supercharge your returns appeared first on The Motley Fool Australia.

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More reading

• These 2 ASX 300 shares were just upgraded by brokers
• Bell Potter just upgraded this ASX uranium stock
• Here are the top 10 ASX 200 shares today
• How ASX uranium shares like Paladin are ‘in a great position to capitalise’
• Why is the Strike Energy share price crashing 31% 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. 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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There could be some big returns on the cards for buyers of South32 Ltd (ASX: S32) shares.

That’s the view of analysts at Goldman Sachs, which believe the ASX 200 mining stock is great value at current levels.

What is the broker saying about the ASX 200 mining stock?

Goldman has responded positively to news that the company has agreed to sell its Illawarra metallurgical coal operations.

The broker highlights that the total consideration of up to US$1.65 billion is above its US$0.97 billion asset valuation and implies a possible 6% uplift in its South32 net asset value estimate of $3.54 per share.

In light of this, the broker is feeling even more positive on the company and has reiterated its buy rating and $3.50 price target. This implies potential upside of 19% for investors over the next 12 months.

In addition, the broker is expecting a 3% dividend yield in FY 2024. This boosts the total potential return to approximately 22%.

Why is it bullish?

There are a number of reasons why Goldman is bullish on the ASX 200 mining stock. This includes its improving free cash flow and dividend yield. The latter is expected to more than double in FY 2025. It explains:

GS are bullish copper, aluminium, zinc and met coal (~65% of S32 NTM EBITDA) in CY24. Together with lower capex, working cap unwind and higher production, we forecast ~US$700mn of FCF in the June H. On our forecasts, S32 is trading on a FCF yield of 6% in FY24 and 10% in FY25 (~5% at spot).

We assume the on-market share buyback is reinstated (at ~US$250mn p.a) with the FY24 results with net debt forecast to fall well below S32’s net debt target of US$1-1.5bn through the cycle. S32 continues to pay out 40% of earnings (min div payout). On our estimates, S32 is on a dividend yield of c. 3% in FY24, but increasing to 7% in FY25.

The post Guess which ASX 200 mining stock could offer a 22% return appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• South32 share price jumps on $2.5b coal sale
• The best ASX shares to buy with $1,000 right now
• Which ASX 200 large-cap shares offer the best dividend yields in 2024?
• South32 share price lifts off as ASX 200 miner greenlights US$2.2 billion project

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 positions in and has recommended Goldman Sachs Group. 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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