Santos and S32

Hi,

I see your comment about “S32 simply having too much cash” and wonder if you think that means that they will return some to shareholders or make a purchase? We are well in profit on our S32 holding and I’ve been seeing a lot of commentary about them being overvalued. We are well down on our Santos holding – but there prospects going forward look good.

I was thinking I would sell all our S32 holding and put some more into STO to average our price down, but now I am not sure.

Can you give me your opinion please? They are both in our SMSF which is primarily in pension mode.

Many thanks

A: S32 and Santos are very different companies with very different exposures – the former to industrial metals, the latter to oil and lng. I am not sure that they are directly comparable.

Of the two, I probably prefer Santos, but acknowledge that this is still higher risk as there are still some lingering concerns about its balance sheet. S32 has run pretty hard and will generate a lot of cash – but remember, these are assets that BHP didn’t want.

With respect to the broker analysts:

Santos – consensus target price is $3.70, about a 9.2% upside to the current price. One broker (Morgans) remains very bearish – their target is $2.28. 6 buys, 1 neutral, 1 sell

S32 – consensus target price is $2.98, about 1.2% higher than the current price. 5 buys, 3 neutrals

Hope this helps


Read Answer