Tag: Motley Fool

The Dusk Group Ltd (ASX: DSK) share price is tumbling today, down 15.5%.

Shares in home fragrance product retailer closed yesterday trading for $1.52. Shares are currently swapping hands at $1.28 apiece representing a new all-time low.

ASX investors look to be hitting the sell button on the back of a trading update released by the company this morning.

What are ASX investors considering?

The Dusk share price is sliding after the company provided some underwhelming guidance for the full 2023 financial year (FY23).

Management said that with 45 weeks of FY23 having passed – including key trading for the company around Mother’s Day – they decided to provide that guidance today.

The sales and earnings before interest and tax (EBIT) forecasts are based on unaudited management accounts to the end of April 2023.

On the sales front, Dusk is forecasting FY23 sales to fall between $135 million and $137 million. FY22 sales came in at $138.4 million.

The Dusk share price is also likely under pressure with the company expecting pro forma EBIT for FY23 to gall in the range of $16 million to $17 million. That’s well down from the EBIT of $26.5 million in FY22.

As for the gross margin rate, management expects FY23 will be similar to last year.

Commenting on the results sending the Dusk share price sliding today, CEO Peter King said:

Trading conditions in the second half of FY23 have been impacted by an increasingly cautious consumer environment, driven by higher interest rates and mounting cost of living pressures impacting the disposable income levels of our core customer.

King noted that the key Mother’s Day period was “softer than anticipated” for sales.

He also highlighted the company’s ongoing growth plans. With new stores continuing to open in the second half of the financial year, Dusk will end FY23 with 145 stores, up from 132 stores at the end of FY22.

“The performance of these new stores as a group is in line with expectations,” King said.

Dusk share price snapshot

The Dusk share price has underperformed over the past 12 months, sinking a precipitous 34%. For some context, the All Ordinaries Index (ASX: XAO) is up 2% over the full year.

The post Dusk share price sinks 16% today as cost of living weighs appeared first on The Motley Fool Australia.

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More reading

• I think these 2 ASX small cap shares could make big returns
• Follow the free cash flow: Could these unloved ASX shares be worth buying?
• This ASX share could pay a 16% dividend yield by 2025

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 recommended Dusk Group. 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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Qantas Airways Limited (ASX: QAN) shares are edging higher on Friday morning.

At the time of writing, the airline operator’s shares are up 0.3% to $6.47.

Why is the Qantas share price rising?

Today’s gain appears to have been driven by a combination of a rising market and the release of a positive announcement.

In respect to the latter, Qantas has revealed that it will boost its international network with extra flights, more aircraft, and new routes as it restores capacity in line with strong travel demand and the broader recovery of the aviation industry.

According to the release, from late October, the flag carrier airline plans to add around one million seats to its international network over 12 months compared to its current schedule. It notes that this will offer customers more choice to popular destinations across Asia, the United States, and the Pacific.

Underpinning this will be more Qantas aircraft returning to service, new aircraft joining the fleet, and an arrangement with oneworld partner Finnair to operate two Airbus A330 aircraft on two Qantas routes.

In addition, its ongoing wet lease agreement with Alliance Aviation Services Ltd (ASX: AQZ) appears to be supporting this increased capacity. This morning, Alliance revealed that four more aircraft have been leased with extended range capabilities.

All in all, these changes will see group international capacity grow to around 100% of pre-COVID levels by March 2024. This is up from 44% 12 months ago and 84% today.

Management advised that most of the flying announced today will be powered by the 2,400 pilots and cabin crew Qantas has recruited since borders reopened. A further 300 employees will be needed by the end of the year.

Prices to come down

The good news for travellers is that this action is expected to result in lower airfares.

Qantas CEO, Alan Joyce, commented:

While airlines globally are working to restore capacity to meet demand, there is still a mismatch between supply and demand for international flying. But with more of our aircraft back in the air, new 787s joining our fleet and our contract with Finnair, we’ve got more seats for our customers and more opportunity for Qantas crew as we increase our own flying. We know our customers are looking for great value and this additional capacity will also put downward pressure on fares.

The post Back to 100%: The deal driving Qantas shares into the green on Friday appeared first on The Motley Fool Australia.

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More reading

• Why Goldman Sachs rates these ASX 200 shares as top buys
• Why Qantas shares are Morgans’ top pick in the travel sector
• Buyback bender: These ASX All Ords shares can’t get enough of their own stock
• Qantas shares: High-flying potential or grounded expectations?
• Rio Tinto and this ASX 200 share are strong buys: analysts

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 S&P/ASX 200 Index (ASX: XJO) stock Lendlease Group (ASX: LLC) has suffered heavily over the last few years. But some investors are seeing value in it now.

For readers that don’t know, Lendlease is a business with a market capitalisation of more than $5 billion. It describes itself as a globally integrated real estate group that’s involved in the development, design, placemaking, construction and investments to deliver “iconic and enormously successful places”.

The company’s involved with a number of different developments including ”Sydney’s award-winning Barangaroo precinct, London’s Elephant Park urban renewal project, Singapore’s Paya Lebar Quarter, Boston’s Clippership Wharf and a $20 billion urban renewal project comprised of four districts in the San Francisco Bay area.” These projects are part of its $120 billion global development pipeline, according to Lendlease.

Why the ASX 200 stock looks cheap

As we can see on the chart above, the Lendlease share price has dropped around 30% over the last year. That’s a lot worse than the S&P/ASX 200 Index (ASX: XJO) which has risen by around 3% in the past year.

But, a fall in the share price alone doesn’t automatically mean that the business is good value.

Romano Sala Tenna is portfolio manager of Katana Asset Management’s Australian equity fund, and he was talking to the Australian Financial Review.

When talking about some of the most underlying ASX 200 stocks in the fund, he named Lendlease, suggesting that it’s trading at a “historically low price to book value of less than 0.90 times.”

The price to book refers to the company’s market capitalisation (or Lendlease share price, in per-share terms) compared to the net asset value (NAV) of the business – it’s cheaper than what the underlying balance sheet is supposedly worth.

Investors can buy $1 of Lendlease net assets for less than $0.90.

However, the fund manager acknowledged that the company faces “pronounced headwinds in the short-term and may stay cheap or fall further”. He said that the fund has started with a small position with a medium-term lens, and expects to build a larger position over the coming 12 to 18 months as the “macro environment normalises”.

What’s the view on the ASX share market?

Romano Sala Tenna said:

We have been overweight cash for the best part of nine months. This is premised on our view that consumer spending will recalibrate notably lower at the same time as inflation and higher debt servicing impact production costs. This combination will most certainly drive earnings lower. The piece of the puzzle that we are less certain about is the impact on shares. In an ordinary cycle, declining earnings equate to declining share prices. However, this is already the consensus viewpoint, and the herd by definition is rarely positioned correctly.

Having said this, we do not have the luxury to hold cash indefinitely. Our current intention is to hold our course until the end of May. If we do not see signs of the market rolling over by that time, we will pivot and selectively deploy capital.

The post One ASX 200 stock ‘trading at a historically low price to book value’ right now appeared first on The Motley Fool Australia.

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More reading

• 4 ASX 200 shares to buy if they plunge from June tax-loss selling
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• Here are the top 10 ASX 200 shares today

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 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 S&P/ASX 200 Index (ASX: XJO) provides some great opportunities to earn a regular passive income.

Especially with the franking credits that many of the top dividend-paying ASX shares offer. You simply won’t find those kinds of potential tax benefits on most international exchanges.

If I were aiming to invest $20,000 for passive income right now, I’d target some of the big ASX 200 energy stocks.

Energy markets are certainly changing, with an ever greater focus on renewables. But the past few years have highlighted the vital role that coal, oil, and gas continue to play in the global energy mix. And I believe that’s highly unlikely to change any time soon.

Now before diving in, take note that the dividend yields we’ll be looking at are trailing yields, backwards-looking by definition. Future yields may be higher or lower depending on a range of company-specific and macroeconomic factors.

With that said, the first ASX 200 share I’d target for passive income is coal stock Yancoal Australia Ltd (ASX: YAL).

Harvesting passive income from black gold and Texas tea

The Yancoal share price has edged lower in 2023, down 6% amid slipping thermal and coking coal prices.

The retrace to $5.34 a share at the time of writing could provide a good entry point to lock in that passive income.

Yancoal paid an interim dividend of 52.7 cents per share on 20 September as profits soared on the back of record-high thermal coal prices. The coal stock delivered a final dividend of 70 cents per share on 28 March. Both were fully franked.

That works out to $1.227 per share in passive income and a whopping trailing yield of 22.7%.

The second ASX 200 energy stock I’d tap for its impressive, fully-franked dividend potential is oil and gas stock Woodside Energy Group Ltd (ASX: WDS).

The Woodside share price has also slipped this year, down 4% amid lower crude oil prices.

As with Yancoal, with Woodside currently trading at $34.32, the passive income potential looks appealing.

Woodside paid an interim dividend of $1.60 per share on 6 October. The all-time high final dividend of $2.154 landed in shareholder bank accounts on 5 April.

That equates to a total dividend payout of $3.754 for a trailing yield of 11.0%.

Dividend income

I’d invest my $20,000 evenly between the two ASX 200 energy shares, giving me pure exposure to the oil and gas sector from Woodside and the coal sector from Yancoal.

That would see me earning an average yield of 16.85%. Or a very welcome $3,370 in passive income hitting my bank account, with potential benefits come tax time.

The post How I’d invest $20,000 today for a $3,370 passive income appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• 2 ASX coal shares with dividend yields over 20%: Are they for real?
• How might this news out of China impact the oil price?
• 5 things to watch on the ASX 200 on Wednesday
• How to invest $10,000 in ASX dividend shares in May

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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It’s likely a question on the lips of many of those invested in S&P/ASX 200 Index (ASX: XJO) lithium shares. Thankfully for those holding Liontown Resources Ltd (ASX: LTR) shares, we have an answer as to when the company might pay its maiden dividend.

Liontown chair and major shareholder Tim Goyder sat down with Bell Direct market analyst Grady Wulff earlier this week to discuss what the coming years might bring the company.

And investors will be glad to know dividends are expected to be on the cards. Though, they’re likely some time away yet.

Right now, the Liontown share price is up 0.71%, trading at $2.83%.

For comparison, the ASX 200 is gaining 0.46% at the time of writing.

So, without further ado, let’s dive into when those invested in Liontown shares might expect to receive dividends from the company.

When can those holding Liontown shares expect dividends?

It’s been a big year so far for the Liontown share price. It’s gained a whopping 130% year to date, with the majority of those gains realised on the back of a takeover bid posed by industry giant Albemarle.

The New York-listed lithium producer offered to pay $2.50 per share for its ASX 200 counterpart in March. Commenting on the company’s rejection of the bid at this week’s Resources Rising Stars conference, Goyder said:

The best people to ascertain the value of a company are the operators of the company, or the board.

We, like Albemarle, believe that it’s a great company. The only thing we differ on, of course, is the price.

And, you know, the longer-term shareholders, including myself, look forward to dividends.

Word of potential dividends likely pricked the ears of investors. Particularly, those already honed in on Liontown following its rebuffed takeover bid and amid major merger news from ASX 200 peer Allkem Ltd (ASX: AKE).

But passive income-focused ASX 200 lithium fans might not want to hold their breath waiting for the company’s payouts.

Its flagship Kathleen Valley Project, located in Western Australia, is on schedule to see first production in mid-2024. From there, three major five-year offtake agreements will take effect.

Electric vehicle giants Tesla, Ford, and LG Energy Solutions have each signed on to purchase up to 150,000 dry metric tonnes (DMT) of the project’s production annually.

When asked why investors should pour their hard-earned cash into Liontown shares, Goyder said:

It all comes back to the deposit. We’ve got a 25-year mine life, a production rate in the order of 600,000 tons a year of concentrate, we’ve got five years locked away with Tesla, Ford, and LG Energy Systems.

So, come year six and onwards, hopefully we’ll be doing downstream, and during that period we are quite confident of paying dividends.

The post Own Liontown shares? Here’s when the company expects to kick start dividends appeared first on The Motley Fool Australia.

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More reading

• Are ASX 200 lithium shares approaching a ‘tipping point’ for ripper revenues?
• Power portfolios: Millionaire investors shun ASX 200 lithium shares
• Liontown share price cracks yet another all-time high on Wednesday
• 3 ASX 300 shares that turned $5,000 into $59,000 or much more in 5 years
• ASX lithium shares are off and racing today. What’s behind the boost?

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 positions in and has recommended Tesla. 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 Flight Centre Travel Group Ltd (ASX: FLT) share price is edging higher this morning.

That’s despite news that a couple of the company’s founders have been selling down their holdings.

At the time of writing, the travel agent’s shares are up 0.5% to $21.50.

Flight Centre share price higher despite founder sales

According to the release, Flight Centre co-founders Geoff Harris and Bill James have been selling shares on-market recently.

In respect to the former, Geoff Harris’ Gehar entity has been selling hundreds of thousands of Flight Centre shares since the beginning of March. This includes the sale of 200,000 shares on 28 April for a total consideration of approximately $3.9 million.

It has been a similar story for James Management Services, owned by Bill James. The co-founder has been selling approximately 25,000 shares almost every week since early in February, receiving in the region of $460,000 to $490,000 with each sale.

On a positive note, the company confirmed that fellow co-founder and current CEO, Geoff Turner, has not been selling shares.

The company also highlights that the two selling co-founders have not been involved with the “company’s day-to-day activities since resigning from the company’s Board of Directors more than 20 years ago.” In other words, this shouldn’t be interpreted as an insider selling event.

Should you be buying or selling shares?

Analysts at Morgans are unlikely to agree with the two co-founders’ decision to sell Flight Centre shares.

Earlier this month, the broker upgraded the company’s shares to an add rating with a $26.25 price target. This suggests potential upside of 22% for investors from current levels. It is also a sizeable premium to what Flight Centre’s co-founders have received for their shares.

The post Flight Centre shares rise despite co-founder sales appeared first on The Motley Fool Australia.

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More reading

• Here are the 10 most shorted ASX shares
• Flight Centre shares are trading around 52-week highs. Too late to buy?
• 2 ASX 200 travel stocks (not Qantas!) just upgraded by Citi
• The Flight Centre share price just rocketed to a new 52-week high. Here’s why
• Which ASX 200 travel share has already taken off by 48% in 2023?

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 Flight Centre Travel Group. 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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Core Lithium Ltd (ASX: CXO) shares are pushing higher on Friday morning.

At the time of writing, the lithium miner’s shares are up 3% to $1.14.

Why is the Core Lithium share price charging higher?

Investors have been bidding Core Lithium shares higher today after the company released a positive announcement.

According to the release, the company’s board has approved the funding of the early works for the BP33 underground project. Core Lithium expects to spend a total of $45 million to $50 million on the early development of the next proposed mine at the Finnis project. This will cover the complete development of a box-cut and preliminary site establishment.

The full development costs for the project will not be known until further studies are complete and include the new BP33 resources.

Subject to a potential early wet season, modelled geotechnical and groundwater impacts, Core Lithium expects the early work to be complete by end of the first quarter of 2024. Around the same time, it expects to be in a position to make a final investment decision on the project.

Management commentary

Core Lithium’s CEO, Gareth Manderson, commented:

We are pleased to announce this positive, incremental investment decision that allows initial works to be undertaken while the feasibility study is completed for BP33, our potential next mine at the Finniss Lithium Operation.

I am pleased the civil works contract has been awarded to a successful locally based business, Northern Australian Civil. NAC currently provides civil construction activities at Grants Operations and is a fantastic local contracting partner which employs local Darwin and NT residents and invests back into the Territory. We will continue focus on the safe ramp up of the Grants open pit and concentrate production through the DMS plant. We will aim to provide final project expenditure and other project metrics once we have incorporated the increased resources into our studies by Q1 CY24.

The post Why are Core Lithium shares charging higher today? appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Are ASX 200 lithium shares approaching a ‘tipping point’ for ripper revenues?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• ASX 200 lithium shares: ‘A great opportunity to buy into weakness’?
• Could Core Lithium shares make the merger menu next?

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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Australian biotechnology giant CSL Limited (ASX: CSL) has made many investors wealthy over the decades, but it’s been a struggle in recent times.

The brutal reality is that the share price is still 10% lower than its pre-COVID high.

So has the healthcare stock passed its heyday, or are there brighter times ahead?

Let’s take a look:

Poised for a break-out year

Morgans analysts reckon CSL shares are a buy, predicting a post-pandemic revival in the business and the stock price.

“We believe CSL is poised to break-out this year,” they stated, according to The Motley Fool’s James Mickelboro.

“A COVID-exit trade… offering double-digit recovery in earnings growth as plasma collections increase, new products get approved and influenza vaccine uptake increases around ongoing concerns about respiratory viruses, with shares offering good value trading around its long-term forward multiple of ~30x.”

The team has a handy 11.6% upside to the stock price over the next 12 months.

Another interesting endorsement is that CSL is currently the fifth most held stock among millionaires, according to investment platform Selfwealth Ltd (ASX: SWF).

“Our millionaire portfolio investors hold strong companies in strong sectors,” said Selfwealth chief executive Cath Whitaker.

Big investors are bullish on CSL

Finally, there are plenty of institutional investors that are backing the biotech business.

The Motley Fool’s Tristan Harrison reported this week that Australian Foundation Investment Co Ltd (ASX: AFI), Argo Investments Limited (ASX: ARG), and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) all hold significant stakes in CSL.

“Argo and AFIC are two of the ASX’s largest and oldest listed investment companies. They focus on ASX blue chip shares that can provide a mixture of dividends and capital growth,” Harrison said.

“At the end of April, CSL shares were the third largest position in the AFIC portfolio, with an 8.1% weighting. CSL was also the third largest position in the Argo portfolio, with a 5.2% holding at the end of April.”

The CSL share price is up 10.5% over the past year and 7.5% higher year to date.

The post What’s the forecast for the CSL share price in the second half of 2023? appeared first on The Motley Fool Australia.

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More reading

• Buy these excellent ASX 50 shares now: broker
• 4 ASX companies that own CSL shares (and lots of them!)
• Top brokers name 3 ASX shares to buy next week
• The top 10 ASX shares held by millionaires
• Top brokers name 3 ASX shares to buy today

Motley Fool contributor Tony Yoo has positions in CSL and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in 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 Scott Phillips.

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The Xero Limited (ASX: XRO) share price was in fine form on Thursday.

The cloud accounting platform provider’s shares surged 9% higher to end the day at $102.49.

Investors were scrambling to buy Xero’s shares after its full-year results impressed the market.

In case you missed it, for the 12 months ended 31 March, Xero posted a 28% increase in operating revenue to NZ$1.4 billion, a 26% lift in annualised monthly recurring revenue to NZ$1.55 billion, and a 45% jump in adjusted EBITDA to NZ$301.7 million.

Where next for the Xero share price?

The good news for investors is that one leading broker believes the Xero share price can keep rising from current levels.

According to a note out of Goldman Sachs, its analysts have responded to the result by reiterating their buy rating with an improved price target of $130.00.

Based on where they are trading today, this suggests that the company’s shares could rise by another 27% over the next 12 months.

What did the broker say?

Goldman Sachs believes the Xero result revealed a “clean, high quality performance with strong growth ahead.” In respect to its performance, the broker said:

UK performance has improved, evident in the strong sub growth (ahead of GSe, top end of guidance). This suggests prior sales execution issues are being resolved, alongside MTD tailwinds & solid macro trends; (2) 2H23 opex performance better than expected with expense ratio 77.9% (vs. guide c.80%). This gives confidence that the 75% FY24 target is achievable; (3) Guidance for sales & marketing as % sales to be flat to marginally down implies > 10% in absolute terms, supporting ongoing subscriber growth. Assuming higher CAC/churn, we still estimate XRO can comfortably add +490-585k FY24 subs (GSe 500k, Ex 3); (3) Stronger than expected FY23 FCF margin at 7.3% in FY23, alongside the rule-of-40 focus implies meaningful consensus upgrades (we revise from 25-29% to 32-34% across FY24-26E.

In light of the above and its positive outlook, the broker continues to see plenty of value in the Xero share price. It concludes:

We revise FY24-26 revenue by +0-1% and EBITDA by +1-3%. We bridge our +18% FY24E revenue growth in Ex 4, and forecast expense ratio of 75.2% vs. c.75% target. Our 12m TP is +3% to A$130 in line with earnings/FX. We re-iterate our Buy (on CL) given strong valuation support (absolute & relative), and await: (1) price changes in mid-23 (GSe +3% ANZ ARPU growth); (2) Xerocon Aug 23-24; and (3) 1H24 result and US update Nov 9.

The post Xero share price can still rise almost 30% from here: Goldman Sachs appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• Why Nufarm, Serko, Temple & Webster, and Xero shares are charging higher
• Xero shares jump 7% on stellar results release
• Xero share price on watch amid strong FY23 growth

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 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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An investor seeking out S&P/ASX 200 Index (ASX: XJO) mining stocks has an abundance to choose from. Perhaps one of the more attractive shares, however, is diversified miner South32 Ltd (ASX: S32).

Katana Asset Management portfolio manager and co-founder Romano Sala Tenna reportedly sees value in the $18 billion ASX 200 mining stock.

The South32 share price last traded at $4.06.

The expert has outlined three reasons why the miner could be a buy in a conversation with the Australian Financial Review. Let’s dive in.

3 reasons South32 shares could be worth considering

Valuation

The first thing the expert likes about South32 shares is their valuation.

Sala Tenna said the stock currently trades with a price-to-consensus financial year 2024 earnings ratio (P/E) of around 7 times.

It also boasted an impressive 6.9% dividend yield as of Thursday’s close, having paid out 28 cents per share over the last 12 months. That doesn’t include the 4.4 cent special dividend paid in October.

Of course, snapping up a stock when it trades at an attractive valuation can increase the potential gains on offer for an investor.

Strong balance sheet

Another reason the expert thinks South32 shares could be worth looking at is the company’s “pristine” balance sheet.

The miner ended the first half of financial year 2023 with US$1.56 billion of cash and equivalents and a net debt position of US$298 million.

It also has access to significant liquidity through undrawn credit facilities.

Potential for M&As

That leads into Sala Tenna’s final reason to like South32 shares – its potential for growth through mergers and acquisitions (M&As).

And the expert reckons the company’s balance sheet leaves it in the position to grow through M&As without issuing more shares. As my Fool colleague Mitchell explains with an incredibly relatable analogy, the more shares in a company on offer, the more its earnings per share (EPS) will be diluted:

Like enjoying a bottle of red among friends… if another glass turns up, that means less red going into yours.

But what might South32 look to buy? Sala Tenna said, as per the publication:

We believe that further acquisitions in the copper space make sense and provide diversification and a push deeper into [electric vehicle] metals.

The post Looking to buy an ASX 200 mining stock? Here are 3 reasons to consider South32 shares appeared first on The Motley Fool Australia.

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More reading

• Brokers expect big gains and huge dividends from these ASX 200 mining shares
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Stay alert! Expert urges buying this ASX dividend stock as soon as it dips below $4
• Analysts name 2 strong ASX 200 dividend shares to buy
• Invested $4,000 in South32 shares 5 years ago? Here’s how much passive income you’ve earned

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 Scott Phillips.

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