Something for everyone
A FEW MONTHS BACK we tipped Exxaro as a short-term punt when it was f lirting with the R160/share mark. It bounced to around R175 and we took the profit off the table. Now Exxaro is back around the R160 mark after a solid sell-off and we think there is once again an opportunity for both longterm investors as well as short-term punters.
A big issue weighing on the price in the near-term was the weak third quarter results from subsidiary Tronox, which came in below expectations. Tronox is on a forward earnings multiple of 4 times while Exxaro is around 8 times earnings. Throw in a 5% dividend yield on Exxaro and it’s a pretty compelling argument. According to FT.com analyst consensus forecast is for an “outperform”, and the median 12-month price target is R200/share. Investors have taken a lot of pain in the near-term, and the volatility in the mining sector adds to the uncertainty around resource shares. As it stands, Exxaro looks like it offers both shortand long-term fundamentals.