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The share price of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is edging into the green in early trading today amid news of an acquisition.

The forward movement comes despite the NASDAQ 100 Index (NASDAQ: NDX) falling overnight. The S&P/ASX 200 Index (ASX: XJO) has also started off today with difficulty.

Soul Pattinson’s latest acquisition

The ASX share owns a diversified portfolio of listed businesses and private businesses.

One of Soul Pattinson’s holdings is the business Ampcontrol.

Ampcontrol says that it delivers integrated electrical, electronic, and control solutions to improve safety and efficiency in mining, renewables, infrastructure, and industrial applications. Soul Pattinson notes that Ampcontrol’s mining sector presence is “strong” with products and services.

At the end of the first half of FY22, Soul Pattinson owned a 42.9% stake in Ampcontrol.

However, now Soul Pattinson has moved to buy all of Australia’s largest privately-owned electrical engineering business, according to the Australian Financial Review.

The newspaper reports that Soul Pattinson has paid to buy the entire business on an enterprise value basis of around $200 million. The other shareholders were reported to be the founders of the business – Keith Grant, Peter Cockbain, Tony Studdert, and Neville Sawyer.

How much revenue and profit does Ampcontrol generate? The AFR noted that, in FY21, the business generated $256.5 million of revenue and $44.9 million of earnings before interest, tax, depreciation and amortisation (EBITDA).

It was also reported that Ampcontrol was a possible contender to list with the help of Bell Potter and Morgans, but it wasn’t able to make a listing happen.

How big of a deal is this?

A $200 million valuation may sound like a lot of money but on the ASX that would only count as a small cap company. Soul Pattinson’s market capitalisation is more than $9.5 billion at the time of writing.

At the end of the ASX share’s FY22 first half, its total portfolio value was $9 billion after the merger with the listed investment company (LIC) Milton Corporation. A $200 million valuation is, therefore, a small percentage of the overall portfolio.

However, at 31 January 2022, Soul Pattinson’s private equity portfolio was worth $650 million. So, Ampcontrol’s value will be a sizeable part of Soul Pattinson’s private business portfolio.

In the half-year result, the ASX share noted that it has “ample liquidity available for new investments due to a strong working capital position.”

Soul Pattinson share price snapshot

Since the start of 2022, the Soul Pattinson share price has dropped by more than 10%.

It’s down almost 13% in the past 12 months.

The post Soul Pattinson share price rises after electric deal for Ampcontrol appeared first on The Motley Fool Australia.

More reading

• Is the Soul Pattinson share price a buy after falling over 10% in 2022?
• Here’s why the Soul Patts share price is getting whacked today
• Keen to bag the Washington H Soul Pattinson dividend? Read this
• 2 defensive ASX dividend shares for long-term income
• Top ASX dividend shares to buy in April 2022

Motley Fool contributor Tristan Harrison owns Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns and has recommended Washington H. Soul Pattinson and Company 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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In morning trade, the Brainchip Holdings Ltd (ASX: BRN) share price has continued its long slide.

At the time of writing, the artificial intelligence technology company’s shares are down 6.5% to 85.5 cents.

This means the Brainchip share price is now down 63% from its January high of $2.34.

Why is the Brainchip share price sinking today?

Investors have been selling down the Brainchip share price amid weakness in the tech sector and in response to the release of a disappointing quarterly update.

In respect to the latter, after the market close on Tuesday, Brainchip released its quarterly update for the period ending 31 March.

According to the release, for the three months, Brainchip recorded cash receipts of just US$205,000.

This was despite the company announcing in January that it has begun taking orders for the first commercially available Mini PCIe board leveraging its Akida neural networking processor, which rounded out its suite of AKD1000 offerings. Furthermore, the company revealed that it spent US$834,000 on advertising and marketing during the period.

Given that the Brainchip share price prior to today implied a market capitalisation of approximately $1.6 billion, investors appear to believe that this level of sales doesn’t justify such a lofty valuation.

Were there any positives?

One positive from the release was that Brainchip’s cash balance has been boosted thanks to its funding arrangement with LDA Capital. That arrangement saw Brainchip issue US$16.1 million worth of shares to LDA Capital upon the submission of capital call notices. However, it is unclear if LDA Capital is holding onto these shares or simply offloading them upon receipt for a quick profit.

Nevertheless, at the end of the period, Brainchip had cash and cash equivalents of US$31.2 million, up from US$19.4 million at the end of December.

Time will tell whether this will be sufficient to see Brainchip through to profitability, if it ever gets there.

The post Brainchip share price sinks amid weak quarterly update appeared first on The Motley Fool Australia.

More reading

• Why has the Brainchip share price tumbled 13% in a month?
• Here’s a look at the laggards from ASX tech shares last quarter
• Compare the ASX share: An analysis of BrainChip vs Archer Materials
• Let’s get technical! 5 best All Ords tech shares of the quarter revealed

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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Experts have buy ratings on some ASX shares that have low price-to-earnings ratios. Hence, these shares could be opportunities in May 2022.

Businesses that have low earnings multiples are sometimes viewed as ‘cheap’ if they are expected to grow earnings. This can also lead to a high dividend yield if the ASX shares have a relatively high dividend payout ratio.

Here are two that experts rate as buys:

Best & Less Group Holdings Ltd (ASX: BST)

Best and Less is an apparel retailer which aims its ‘affordable’ products at mums and families.

The company is rated as a buy by the broker Macquarie, with a price target of $4.10. That suggests a possible upside of around 30%.

While the first half of FY22 was affected by COVID lockdowns, there were some statistics that showed improvement. The gross profit margin improved by 210 basis points to 50.8%. The cost of doing business (CODB) decreased by 7% to $115.4 million, however net profit after tax (NPAT) did drop by 21.3% after a 13.8% decline in revenue to $287.5 million.

According to Macquarie, the Best & Less share price is valued at under 9 times FY22’s estimated earnings and around 8 times FY23’s estimated earnings.

Macquarie expects the Best & Less dividend yield to be high. In FY22, the grossed-up dividend yield is expected to be 12.4%. Then, in FY23, Macquarie expects the Best & Less grossed-up dividend yield to be 12.9%.

The cheap ASX share has a number of strategies to keep growing the business including increasing its market share in ‘baby and kids’, improving the womenswear offer, investing in online capabilities and securing new store sites.

Adairs Ltd (ASX: ADH)

Adairs is a retailer of homewares and furniture through three different brands: Adairs, Mocka and Focus on Furniture.

The business has a number of plans to grow its operations.

Adairs says that its larger stores are much more profitable than its smaller format stores. So it’s working on upsizing its stores in certain locations.

The business has opened a new national distribution centre. This is aimed to increase efficiencies, improve stock flow, allow it to fulfil more online orders and save on costs.

It’s aiming to grow its membership numbers because members typically spend more and are more loyal.

The cheap ASX share also plans to expand the Focus on Furniture store network in Australia, as well as grow its online sales.

It’s currently rated as a buy by the broker Morgans. The Adairs share price is valued at 7 times FY23’s estimated earnings. Adairs has a projected grossed-up dividend yield of 13% for FY23.

The post 2 cheap ASX shares to buy in May: Experts 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 and has recommended ADAIRS FPO. The Motley Fool Australia owns and has recommended ADAIRS FPO. The Motley Fool Australia has recommended Macquarie 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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The Northern Star Resources Ltd (ASX: NST) share price is dropping on Wednesday.

In morning trade, the gold miner’s shares are down 2% to $10.00.

Why is the Northern Star share price dropping?

Investors have been selling down the Northern Star share price today after the gold miner’s quarterly update disappointed.

For the three months ended 31 March, Northern Star reported total gold sold of 380,075 ounces at an all-in sustaining cost (AISC) of A$1,656 per ounce.

This reflects 212,820 ounces of gold sold with an AISC of A$1,659 per ounce at Kalgoorlie, 109,766 ounces of gold sold with an AISC of A$1,444 per ounce at Yandal, and 57,489 ounces of gold sold at an AISC of US$1,483 per ounce at Pogo.

While this means that its Australian operations, which account for 85% of total production, are on track to meet FY 2022 production and cost guidance, this won’t be the case for its Pogo operation. It is expected to fall short of its guidance for production and costs.

In light of this, management has retained its FY 2022 group production guidance at 1.55M ounces to 1.65M ounces but has lifted its AISC guidance to A$1,600 to A$1,640 per ounce. The latter is up from its previous guidance of A$1,475 to A$1,575 per ounce.

Nevertheless, for the quarter, thanks to an average realised price of A$2,468 per ounce, Northern Star reported sales revenue of A$937 million for the quarter. This was broadly in line with what was recorded during the December quarter.

Management commentary

Northern Star’s Managing Director, Stuart Tonkin, acknowledged that the company had a tough quarter.

He commented: “During the quarter, Kalgoorlie was impacted due to unplanned mill downtime events while Yandal performed in line with expectations. As foreshadowed, higher mining inventory at Pogo is delivering a better milling outcome but we have more work to do to deliver on Pogo’s potential.

“Group-wide and against a challenging operating backdrop, we continue to safely advance the foundation of our five-year profitable growth plan. One year in, we have significantly lifted material movement volumes at KCGM, working through the OBH cutback, almost completed the Thunderbox mill expansion and successfully commissioned Pogo’s expanded mill.”

The post Northern Star share price tumbles on guidance update appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Wednesday
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• What’s boosting the Northern Star share price on Tuesday?
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• Here’s why the Northern Star share price is climbing 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 Bruce Jackson.

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Analysts have identified some S&P/ASX 200 Index (ASX: XJO) blue chip shares that could be opportunities to buy in May 2022.

Blue chip shares are some of the biggest businesses on the ASX. Often, they are the market leaders of their industries in Australia.

With that in mind, here are two potential opportunities that analysts like:

Xero Limited (ASX: XRO)

Xero is one of the world’s largest accounting software providers.

After a 34% decline in the Xero share price since the start of the year, it now has a market capitalisation of $14.6 billion.

It’s currently rated as a buy by the broker Citi, with a price target of $132.60. That implies a possible rise of close to 40% over the next year for Xero.

Xero is due to release its FY22 result in a couple of weeks.

However, the company’s FY22 half-year result indicated ongoing growth for the ASX 200 blue chip share. It reported that both operating revenue and total subscribers increased by 23%. This helped annualised monthly recurring revenue increase by 29% to NZ$1.13 billion.

Xero pointed to the strength of its software as a service (SaaS) metrics that have continued to “trend positively” including the average revenue per user (ARPU), the gross profit margin (up 1.4 percentage points to 87.1%,) and its subscriber churn.

The company says that it will continue to focus on growing its global small business platform and maintain a preference for reinvesting cash flow generated to drive long-term shareholder value.

Sonic Healthcare Ltd (ASX: SHL)

Sonic is a large, global provider of pathology services. It’s also growing its radiology presence in Australia. The company has a significant pathology presence in Australia, the US, Germany, the UK, and Switzerland.

The company continues to see the ongoing growth of its ‘base’ business revenue, which excludes COVID-19 testing. It’s expecting ongoing growth of its base thanks to “strong” underlying drivers, including a catch-up of other testing postponed throughout the pandemic.

However, COVID testing has been a significant earner for the business. In the first six months of FY22, COVID revenue rose 16% to $1.3 billion.

While COVID testing volumes may be changing, the ASX 200 blue chip share is expecting a sustainable level of COVID testing into the future, including “routine COVID testing, screening programs, variant testing, whole genome sequencing and antibody tests”.

The business has been making acquisitions with the extra capital that it has accumulated thanks to the COVID testing cash flow. Two examples of that are ProPath, which generates US$110 million of revenue, and Canberra Imaging Group, which generates A$60 million of revenue.

Sonic Healthcare says that an active pipeline of opportunities is under evaluation.

It’s currently rated as a buy by the broker Credit Suisse, which suggested that Sonic Healthcare can keep benefiting from COVID PCR tests. The broker thinks the Sonic share price is valued at 19 times FY23’s estimated earnings.

The post 2 ASX 200 blue chip shares to buy in May: Analysts appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Wednesday
• Are these 2 ASX tech shares top ideas for May 2022?
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• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Is the Zip share price set to sink below the $1 mark for the first time since 2018?

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 and has recommended Xero. The Motley Fool Australia owns and has recommended Xero. The Motley Fool Australia has recommended Sonic Healthcare 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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Wesfarmers Ltd (ASX: WES) is one of ASX’s oldest dividend paying shares.

The company has been handing investors a portion of its profits every half since 1985 – 2 years earlier than the ASX’s formation.

The ASX came together in 1987 when 5 different state-based stock exchanges merged into the one we now know and love.

On top of that, most of Wesfarmers’ dividends have been fully franked.

But owners of Wesfarmers shares might not know their dividends can serve a different purpose.

Their payouts can help them increase their hold in the company without paying brokerage fees through Wesfarmers’ dividend reinvestment plan. Let’s take a closer look at what the plan entails.

As of Tuesday’s close, the Wesfarmers share price is $49.02.

The nitty-gritty of Wesfarmers’ dividend reinvestment plan

Owners of Wesfarmers shares are likely used to a cash dividend being deposited into their bank account every half year.

But there’s another way they can benefit from the payout. Wesfarmers offers a dividend reinvestment plan.

The plan sees the company’s dividends paid via shares instead of cash. And those shares might come at a discount to the market price.

By opting into the plan, shareholders will receive a number of shares to the value of a dividend payout, with the company able to offer a slight discount on market price.

Any remaining balance – that is, a portion of a dividend payment that doesn’t amount to the value of a full share – will be rolled over to the next dividend payout.

Shareholders can also choose to partly participate in the plan, opting for only a portion of their shares’ dividends to go towards increasing their holding.

Additionally, participation in the plan doesn’t change a shareholder’s tax position with respect to the dividend payment.

Finally, the company can choose whether to offer new or existing shares through the dividend reinvestment plan. It can also suspend the plan at any time with a month’s notice.

Sadly, not everyone can get on board with Wesfarmers’ dividend reinvestment plan. Only shareholders with an Australian or New Zealand address can opt in.

Wesfarmers’ next dividend will likely be announced alongside its upcoming full year results. They should hit the market on 26 August.

The post Does Wesfarmers have a dividend reinvestment plan? appeared first on The Motley Fool Australia.

More reading

• 2 blue chip ASX 200 shares to buy according to experts
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• Why is the Wesfarmers share price having such a rough trot in April?
• Down 20% in 2022, is the Wesfarmers share price a clear opportunity?
• Why has the Woolworths share price outperformed Wesfarmers so far in 2022?

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 owns and has recommended Wesfarmers 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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ASX mining shares softened yesterday amid sector weakness and China’s worsening COVID-19 prognosis.

The S&P/ASX 300 Metals & Mining Index (ASX: XMM) closed the session down by almost 6% on Tuesday. This brought the benchmark’s losses to 11% for the past week. It’s down 6% this past month.

Meanwhile, these three ASX mining shares managed to surge more than 20% yesterday.

BMG Resources Ltd (ASX: BMG)

The first ASX mining share to highlight is BMG Resources. BMG shares spiked to finish 20% in the green following a company announcement.

The company revealed it had intersected new portions of thick, high-grade gold at its Capital Prospect located at the Abercromby Gold Project.

According to the company, results “significantly add to the known mineralised envelope at the Capital Prospect which remains open at depth and along strike.”

Speaking on the results, BMG managing director Bruce McCracken said that it’s “now well and truly game on at Abercromby”.

“In one single program, we have more than doubled the likely size of the deposit, intersected extremely high-grade gold in fresh rock, and proven the system is fertile at depth via the deepest drilling undertaken at the Project to date.”

Western Mines Group Ltd (ASX: WMG)

Next on our list of outstanding ASX mining shares is Western Mines. Its share price also surged higher on Tuesday, closing at 34 cents. That was a 19% gain for the day. At one point, they were fetching 37 cents apiece before levelling off in afternoon trade.

The company advised today that the diamond drilling program at its flagship Mulga Tank Ni-Cu-PGE Project has now commenced.

The company says that numerous exciting drill targets have been defined at the project. WMG managing director Caedmon Marriott said, “each hole will take between eight to fifteen days to complete”.

Continuing, he added:

The Company is also pleased to have completed the due diligence hurdle for the sale of the Pavarotti Project iron ore rights to Mineral Resources. Cash proceeds of $200,000 are expected to be received this week and these funds will go towards expanding the Mulga Tank drilling program.

The Western Mines share price has gained 70% since listing in mid-2021 and is up 84% this year to date.

Far East Gold Ltd (ASX: FEG)

Our final ASX mining share is Far East Gold. It also finished up 21% at 40 cents apiece. In an announcement, the company advised it had returned bonanza grade assays from its Rek Rinti and Aloe Eumpeuk gold and silver ‘vein systems’ in Indonesia.

Within the Aloe Eumpeuk prospect, Far East says that rock chip sampling of quartz veins has returned further bonanza gold and silver grades of 63 g/t gold, 1,179 g/t silver, and 26.16 g/t gold, 597 g/t silver.

“The bonanza grade samples exhibit ginguro bands which are a key textural feature common to highgrade low sulphidation epithermal vein deposits within the Gosowong Goldfield (>6Moz Au at
grades of 20-40 g/t Au) in Indonesia and at Hishikari (8Moz Au at grades of 30-40g/t Au) in Japan,” the company says.

Regarding its study results, Far East said that it expects “detailed mapping” will establish continuity of the structural corridor between the Rek Rinti and Aloe Eumpeuk vein systems.

It notes the Aloe Rek vein system is located about 2km south of Aloe Eumpeuk. If confirmed, this would “form a continuous system of veins over a strike length of about 4.5km”.

After listing in March 2022 the Far East Gold share price has doubled and gained 35% in the past week.

The post 3 ASX mining shares that surged by 20% or more on Tuesday appeared first on The Motley Fool Australia.

More reading

• 3 ASX mining shares blasting more than 30% higher today

Motley Fool contributor Zach Bristow 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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Megatrends are major global changes than can impact the economy, ASX companies and the world.

Examples over time include electricity and the internet. But right now, there are new megatrends at play.

Let’s take a look at what they are and which ASX shares could be impacted?

What are the megatrends in 2022

Five megatrends identified in a recent Livewire article include battery minerals, decarbonisation, automation, digital currencies and the ageing population.

Speaking to the publication, Felicity Thomas from Shaw and Partners recommended ETFS Battery Technology and Lithium ETF (ASX: ACDC) as a way to get exposure in the battery minerals space. She cited the Biden administration’s investment in electric vehicles (EV).

Thomas said:

For me, this is a buy. I really like future-facing commodities and ACDC is a way to get diversified exposure to that kind of theme. The US has also created a 50% electrification target, so I think there’s going to be a push there.

However, Pivot Wealth founder Ben Nash had a different take on this fund, suggesting investors sell it. He said, “I think if you look at the performance of this ETF relative to the market and relative to commodity prices over the period, it probably doesn’t seem to be lining up for me.”

The ETFS Battery Tech and Lithium ETF has fallen nearly 15% year to date.

Looking at decarbonisation, Thomas recommends VanEck Global Clean Energy ETF (ASX: CLNE). She again cited the United States investment in green technology, adding:

For me, CLNE is a buy. It’s the only ETF that is actually a pure-play green energy ETF. So I think it’s quite unique and I believe that the US last year spent a lot of money on climate change, so I think it’s going to come into its own.

However, Nash again had a different take, rating this ETF as a sell:

I think it is extremely niche, and while I do believe in the theme and that the space will grow over time, for me, the lack of diversification just suggests a bit more volatility for investors.

VanEck Global Clean Energy ETF has dropped nearly 13% year to date.

The post What is a megatrend and which ones are impacting ASX shares right now? appeared first on The Motley Fool Australia.

More reading

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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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This one ASX lithium share has surged 30% in a month to trade at its top level since joining the ASX.

The Green Technology Metals Ltd (ASX: GT1) share price has surged 29.78% since 28 March. In Tuesday’s trade, the company’s share price climbed another 5% to $1.155.

Let’s take a look at what is driving this share price boost.

This ASX lithium share just keeps on rising

This ASX lithium share may be on the rise in the last month, but it is not a new trend. In fact, the Green Technology Metals share price has rocketed more than 200% in the past six months.

The Western Australian company is one of many ASX lithium players to surge recently amid the rising demand for electric vehicles (EVs). Lithium is an essential component of EV batteries. Deloitte predicts electric vehicle sales will make up 32% of the car sales market by 2030.

Green Technology Metals is exploring the Seymour Lithium project in Ontario, Canada.

On 12 April, Green Technology reported drilling intercepted “thick, high grade” lithium oxide.

Commenting on the results, CEO Luke Cox said:

The phase 1 drilling program at Seymour continues to deliver excellent outcomes. The latest set of assays have returned further thick, high-tenor intercepts that significantly extend the known boundaries of the North Aubry deposit.

On 28 March, Green Technology Metals furthered its joint venture interest in Ontario Lithium Projects by 29% to 80%, up from 51%. This includes the Seymour, Root and Wisa projects.

Share price snapshot

The Green Technology Metals share price has soared 122% in the year to date and 28% in the past week.

In comparison, the S&P/ASX 200 Index (ASX: XJO) has fallen nearly 2% in the year to date.

The ASX lithium share has a market capitalisation of $122 million based on the current share price.

The post Guess which ASX lithium share has leapt 30% in a month to trade at all-time highs? appeared first on The Motley Fool Australia.

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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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The South32 Ltd (ASX: S32) share price was out of form on Tuesday.

The mining giant’s shares ended the day 8% lower at $4.46.

Why did the South32 share price tumble?

Investors were selling down the South32 share price yesterday amid broad weakness in the resources sector and a negative reaction to the company’s quarterly update.

The latter revealed that South32 has increased its cost guidance to reflect higher input costs, royalties, and foreign exchange.

Is this a buying opportunity?

According to a note out of Goldman Sachs, its analysts remain very positive on the South32 share price and appear to see yesterday’s selloff as a buying opportunity.

The broker has retained its conviction buy rating with a trimmed price target of $5.70.

Based on the current South32 share price, this implies potential upside of 28% for investors over the next 12 months.

In addition, Goldman is forecasting a fully franked 8% dividend yield in FY 2022 and then 13% in FY 2023 and FY 2024.

Why is Goldman bullish?

Goldman Sachs has listed three key reasons why it is bullish on the South32 share price. It explained:

Valuation: The stock is trading at c. 0.95x NAV (A$5.10/sh) including the completion of the acquisition of a 45% stake in the Sierra Gorda copper mine in Chile.

Strong FCF outlook: We forecast a FCF yield of c. 18% in FY23 (over 25% at spot), driven mostly by exposure to base metal price momentum (aluminium & alumina c. 50% of FY23 EBITDA, copper c. 10%, zinc/nickel c. 20%), met coal (c. 15% of EBITDA), a c. 30% or c. 280ktpa increase in aluminium production over the next 18 months from the Alumar restart & a c. 17% increase in Mozal stake, creep in nickel from Cerro Matoso and lead/zinc/silver from Cannington, and uplift from the Sierra Gorda acquisition.

Increased capital returns: We assume the buyback continues to be extended (at ~US$200mn p.a) and assume S32 resets its balance sheet metrics (we think targeting US$0-800mn net debt through the cycle based on our view of suitable balance sheet leverage) pays out 60% of earnings (40% ordinary, 30% special dividend component) with the FY22 result. On our estimates, S32 is on a dividend yield of c. 8-13% in FY22-FY24.”

All in all, this could make South32 a top option if you’re looking for exposure to the resources sector.

The post Goldman Sachs names 3 reasons why the South32 share price is a bargain buy appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Why Chalice Mining, EML Payments, Mineral Resources, and South32 shares are tumbling
• South32 share price sinks 8% amid rising cost guidance
• 2 ASX 200 dividend shares to buy according to brokers
• Is South32 an ASX dividend stock?

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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