BHP Billiton shares drop as analysts lower valuation of South32

on Apr 2, 2015
Updated: Oct 21, 2019

BHP Billiton’s (LON:BLT) shares lost 2.18 percent to 1,438.00p as of 13:42 BST today as Deutsche Bank reduced its valuation of South32, the company being created in the demerger of BHP Billiton, to $11.2 billion (£7.565 billion) from $13 billion, taking into account the plummeting price of key metals, according to a report in The Australian.

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South32 is expected to make its debut on the Australian Stock Exchange (ASX) on 2 June if BHP Billiton shareholders approve the demerger plan on 6 May. South32 comprises mostly aluminium assets. However they also possess manganese, coal and nickel mines and smelters.
Both aluminium and nickel prices have dropped by 25 percent since December last year, which, coupled with oversupply and weaker demand, prompted Deutsche Bank to cut its value estimate for South32. The German banking group now expects the soon to be created company to trade at $2.68 per share, or a total $11.2 billion. Consequently, this means that South32 may not be in the top 20 ASX companies as previously thought, unless commodity prices pick up sharply again by June, as reported in the Australian today. Alternatively the company could make the top 20 if it chose to use its solid balance sheet to secure rapid acquisitions, as Deutsche Bank suggested it may.
“Strategically, we believe South32 will go on the hunt for acquisitions, both operating assets and greenfield projects,’’ The Australian quoted the bank as saying. Analysts believe that Anglo American’s (LON:AAL) 40 percent stake in the manganese business it shares with South32 is a likely acquisition possibility.
At spot prices, Deutsche Bank values South32 at $6.9 billion, or $1.66 per share.
Earlier this month, Citi valued South32’s market capitalisation at $17 billion but noted that when assessing the company at spot prices, the evaluation drops to around $10 billion.
As of 14:48 BST, Thursday, 02 April, BHP Billiton plc share price is 1,437.00p.


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