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!