Shares of the freshly-listed South32 Ltd (ASX: S32) have continued their rapid ascent today. While the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has risen roughly 0.9%, the miner has jumped another 2.1% to $2.41, giving it a total gain of 17.6% since Monday's closing price.
The miner began its life as a publicly listed company on Monday after splitting from its parent entity, BHP Billiton Limited (ASX: BHP). While most analysts were struggling to ascribe a proper value to the stock (due to fluctuating commodity prices and political risks, among other factors) it debuted at $2.13 per share with a total market value of $11.3 billion.
Since then, a number of financial institutions have chimed in with their opinions on the stock. While Citi, CLSA and Credit Suisse have all provided a target price of $2.50, Macquarie and RBC have gone 10 cents either way with the latter targeting $2.60, while Macquarie initiated covered at just $2.40. However, JPMorgan analysts were the most bullish on the stock, suggesting it could push towards $2.95 per share.
Although I am typically bearish on resource companies as they are price takers (that is, they have no control over the price at which they sell their produce), South32 is an appealing investment prospect given its ability to significantly reduce costs on its current operations.
The assets that are now operated under the management of South32 have long been neglected by BHP Billiton in favour of their "core" commodities (being iron ore, copper, coal and petroleum), so South32 can now focus on reducing costs and improving overall productivity which will ultimately boost profits.
With minimal debt on its balance sheet, South32 could prove to be a rewarding stock for investors who buy today.
