Upon returning from a company organised Illawarra site visit, Citi analysts note that while coal quality is first class, costs and sustaining capital are high. The fixed cost base is high, the analysts emphasise.
They have increased opex and capex forecasts for Illawarra and cut price forecasts for thermal coal by -6% for FY20, resulting in lowered estimates for South32. Price target loses -10c to $4.10.
Buy rating retained as Citi analysts, once again, note the share price looks pretty cheap, while also acknowledging global uncertainty about coal might deter at least some investors from jumping on board.
Target price is $4.10.Current Price is $3.24. Difference: $0.86 – (brackets indicate current price is over target). If S32 meets the Citi target it will return approximately 21% (excluding dividends, fees and charges – negative figures indicate an expected loss).