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South32 upped to ‘buy’ as UBS highlights “clear catalysts” for share price growth

The Swiss bank said they expected the company to restart its share buyback at its results in August given its balance sheet, cash flow generation and a “robust” recovery in Chinese demand

South 32 - South32 upped to ‘buy’ as UBS highlights “clear catalysts” for share price growth

South32 Ltd (LON:S32) has been upgraded to ‘buy’ from ‘neutral’ by analysts at UBS, who said that the miner’s risk/reward profile was now “attractive” and there were “clear catalysts” to boost the share price.

In a note on Thursday, the Swiss bank said the company had an attractive commodity risk, with upside to alumina, aluminium and met-coal prices in the medium term as well as manganese ore which the bank said had “surprised positively in 2020”.

UBS also said they expected the company to restart its share buyback, suspended in March, at its results in August given its balance sheet, cash flow generation and a “robust” recovery in Chinese demand.

The bank also expects South32 to exit SA Energy Coal by December in a “value and ESG accretive transaction”, adding that they also saw “potential for S32 to exit orphan (eg nickel) or downstream (eg smelters) assets medium term”.

UBS also retained their 140p price target, predicting that the company will generate earnings of US$51mln in the second half of the year and pay a dividend of US$0.014 per share.

Shares in South32 rose 1.8% to 120.7p in late-morning trading.

Quick facts: South 32

Price: 112.52 GBX

LSE:S32
Market: LSE
Market Cap: £5.45 billion
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