South32 is trading on free cash flow yields of 47% and 36% for FY23 and FY24, and Macquarie believes this metric is a good proxy for future total shareholder returns.
After incorporating a free cash flow payout ratio of 90%, the total shareholder return could be around $800m, or 45% higher than the broker is currently estimating.
Macquarie maintains its Outperform rating and $7 target price.
Sector: Materials.
Target price is $7.00.Current Price is $4.94. Difference: $2.06 – (brackets indicate current price is over target). If S32 meets the Macquarie target it will return approximately 29% (excluding dividends, fees and charges – negative figures indicate an expected loss).
