19 MAY 2015Financial Times
The South32 rises: BHP's spin-off gains on day two
Edited by : AL CIRCLE
2 min read
The share price of South32, BHP Billiton's spin-off, is the best performer on the ASX on its second day of life as a listed entity.
South32 contains a bunch of assets and commodity exposures BHP considered to be "non-core". These include aluminium and manganese, as well as coal and nickel exposures, leaving "The Big Australian" to concentrate on its four pillars of iron ore, copper, petroleum and coking coal (and potash as a potential fifth).
Monday marked the first day of trading for South32 as a separate entity, and it was a lacklustre debut. The stock opened at A$2.13, rose as high as A$2.22 and closed at A$2.05. That puts its toward the bottom end of most analysts' valuation range. The slimmed-down BHP closed 0.8 per cent lower on Monday to A$30.13, meaning the combined value of the two companies was less than the A$32.49 per share closing price on Friday for the old, single entity.
The child is having a better day than the parent on Tuesday, though. South32 was up as much as 11.2 per cent to A$2.28 in morning trade in Sydney, while BHP is down 1.3 per cent at A$29.72.
Among broker moves this morning, JPMorgan initiated coverage on South32 with an overweight recommendation and a target price of $2.95 (see table below), Citi is telling clients to buy, with a $2.50 target price, while Macquarie has slapped on an outperform rating and a $2.40 target.
South32 contains a bunch of assets and commodity exposures BHP considered to be "non-core". These include aluminium and manganese, as well as coal and nickel exposures, leaving "The Big Australian" to concentrate on its four pillars of iron ore, copper, petroleum and coking coal (and potash as a potential fifth).
Monday marked the first day of trading for South32 as a separate entity, and it was a lacklustre debut. The stock opened at A$2.13, rose as high as A$2.22 and closed at A$2.05. That puts its toward the bottom end of most analysts' valuation range. The slimmed-down BHP closed 0.8 per cent lower on Monday to A$30.13, meaning the combined value of the two companies was less than the A$32.49 per share closing price on Friday for the old, single entity.
The child is having a better day than the parent on Tuesday, though. South32 was up as much as 11.2 per cent to A$2.28 in morning trade in Sydney, while BHP is down 1.3 per cent at A$29.72.
Among broker moves this morning, JPMorgan initiated coverage on South32 with an overweight recommendation and a target price of $2.95 (see table below), Citi is telling clients to buy, with a $2.50 target price, while Macquarie has slapped on an outperform rating and a $2.40 target.
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