Some­thing for ev­ery­one

Finweek English Edition - - INVESTMENT - MARC ASH­TON

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 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.

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