Is South32 Ltd going North?

As you probably know BHP Billiton has simplified its portfolio by demerging a group of high quality assets to create an independent 
global metals and mining company, South32.

As a part owner of BHP Billiton, I received some shares in South32. Because I own 30 stocks of BHP Billiton Plc – ADR (BBL) I am now the proud owner of 12 South32 Ltd-ADR stocks in my Vrijheid Fonds. This happened on May 18th. The question is: What to do with South32?

My first reaction on the demerger was: I did not hold BHP because BHP owned these South32 assets, therefore why would I necessarily hold on to those assets post de-merger?
So I did some digging on the Internet. Before I take some action, I want and need some information. Of course, I first looked at my fellow DGI bloggers who owned BBL also. Unfortunately not a single blogger wrote a post on South32. Or did I miss anything?

Than I read an article from the analyst of JPMorgan, who wrote: “while they may not be the “best bits of BHP”, the South32 assets are well-positioned in the first or second quartile of their respective industry cost curves, which is a good starting point for any miner”.

Okay that is a good start. After that I read more notes from different analyst/brokers. They were overwhelmingly positive.

The forward Yield is estimated between 3% and 5%. And at the start of trading the stock looked reasonable valued according to the analysts. It is valued at approx. 12 times estimated earnings for the next fiscal year. In comparison BBL is trading at approx. 16 times.

In conclusion: South32 is at this moment reasonable priced and worth hanging on. Just wait and see what happens. And give the well-admired management team some time to really make something big out of this demerger. Or maybe there will be a bigger player to buy up South32?

What do you think of South32? Do you own shares of South32, and what are your intentions with this stock?

I like to hear from you!


30 thoughts on “Is South32 Ltd going North?

  1. The Dividend Drive

    Hi Pollie, I wrote something on South32 when it entered my portfolio last month (here, if you’re interested, http://bit.ly/1HvUIBk).

    I decided to hold in the end. After all, the reason I chose BHP over other miners was due to the diversity of materials they mined. As a result, selling South32 would undermine that diversity. Also, I suspect that their decision was a sound one. If the efficiency they have in mining iron ore can be–even if only modestly–reached towards with South32’s assets it could become an even more profitable mining company.

    There proposals as to shareholder returns seems reasonable, their balance sheet is solid and the assets they have–as you note–are very high quality in the respective areas.

    I think you’re right though that another mining company may find them too attractive to overlook. As a result, they may be bought out at some point in the future. Quite possibly not though!

    Anyway, hope my post may be of interest. I should imagine the analyst predictions have changed a bit since I published it, however. I will take a look!

    1. polliesdividend Post author

      Hello DD,
      Thanks for stopping by!
      Yes I mist your post. I surrely will read it in the next couple of days. Thanks for pointed it put to me.

      I appreciate it that you took the time to write down your decision. I can relate to your thoughts on South32


      1. The Dividend Drive

        My pleasure. I hope you find it interesting in some way. It will be interesting to see what their first financial report looks like.

        For me it is quite an easy decision at the moment to hold (as noted above). But, of course, depends on your own requirements for a stock!

        Keep up the good work and good luck with your research/decision on South32!

  2. Redeemed Finance

    I’m having trouble finding this on the NYSE – I see both BHP and BBL but don’t see South 32 at all. Seems $SOUHY may be a placeholder for South 32 on NASDAQ but it’s still a pink sheet. Aside from all that, I actually really enjoy getting stock splits and/or gifted shares to other companies from time to time. Increasing total number of shares portfolio wise can never be a bad strategy and although there may be price blips my long term investing mindset enjoys the splits.

  3. Stalflare

    Hi there Pollie,
    I am a proud owner of some S32 shares, and to be honest I have the same doubts as you have. I have started only recently into the Dividend Investing “world” and there are more questions than certainties especially at the beginning for me. One thing though must be said… I have the equivalent of 57 pounds of shares, hardly an amount that can shake the ground if sold at 300% increases, so in the end I will sell off the stock and I will account it as an “extra dividend” from BHP. Not sure if this can help but that’s what I am planning to do. What is sure is that investing further in the Mining industry is a possibility that at the moment I am not looking at.

    Ciao ciao


  4. Special Agent Dividend

    I haven’t seen many write-ups on the demerger either, as I figured many would add their opinion because BHP/BBL was a top buy for many DGI bloggers during the winter. I plan on keeping my South32 shares and just seeing how it goes. If I had a larger position, I may consider selling and adding to an outstanding established position but in my case, I’m going to hold and hope for growth

  5. Simon @MyRichFuture.com

    Personally, I’m hanging on to these shares. I’ve a long-term view and there’s always that chance of a juicy takeover.

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