“It was a strong result from S32, very close to consensus expectations, including a bumper final dividend that included a US3 cent special dividend,” Raymond said.
“S32’s final dividend impressed, announcing a US14 cent ordinary and US3 cent special dividend. S32 returned 10% of its market cap in financial year 2022.
“Despite material increases in unit costs, S32 still reported operating margin growth across all segments (ex-Cannington).
“Earnings multiples are regularly inconsistent value indicators in resources, but in S32’s case, we believe it shows the market is misjudging how much residual earnings power will remain in the business post cycle peak.
“It boasts strong cash flow, dividend profile and balance sheet.
“We maintain an Add rating with a A$5.50 target price,” Raymond concluded.
South32 Limited (s32)
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