South32: BHP spin-off continues to trade well

SOUTH32 advanced on its second day of trade as brokers, including RBC Capital Markets and Macquarie Group, initiated coverage of the BHP Billiton spin-off with outperform recommendations. South32 surged as much as 10.33 percent in Johannesburg yesterday, before closing 7.21 percent higher at R21.70, following gains of as much as 14 percent in Sydney, where it has its primary listing. “South32 is an attractive longer-term investment proposition,” RBC said yesterday. “It offers exposure to a high-quality portfolio of assets, good forecast cash flow, a strong balance sheet and significant leverage to an expected improving commodity cycle.” It was the only large mining producer listed on Australia’s ASX with little debt and no exposure to iron ore, the steelmaking-ingredient that has slumped 16 percent this year, Macquarie said. Investors might benefit from a forecast $300 million (R3.5m) in cost savings by 2016, it said. – Bloomberg