The December quarter was soft, Credit Suisse observes, amid weak manganese prices. The main change to estimates is driven by an expected effective tax rate of 75-85% in the first half. There are no available tax benefits to use from South Africa Energy Coal.
While the first half dividend is considered likely to be mediocre, the broker notes the balance sheet has plenty of capacity to extend the capital management program beyond February.
Credit Suisse suspects South32 will require some further commodity price help and operating improvement in FY21 to lift the share price meaningfully. Outperform rating and $3.10 target maintained.
Target price is $3.10.Current Price is $2.85. Difference: $0.25 – (brackets indicate current price is over target). If S32 meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges – negative figures indicate an expected loss).