BlueScope Steel: Valuation Capped by Takeover and Break-Up Uncertainty Supports Hold Rating

Morgan Stanley analyst Joseph Michael has maintained their neutral stance on BLSFF stock, giving a Hold rating on January 15.

Joseph Michael has given his Hold rating due to a combination of factors related to valuation, deal dynamics, and uncertainty around a potential break-up of BlueScope Steel. He notes that the company’s board has repeatedly rejected takeover offers, including the most recent A$30 per share proposal, on the grounds that they undervalue the business. His analysis of a break-up scenario suggests a valuation range of roughly A$30.50 to A$40 per share, which implies limited downside from current levels but only moderate upside, depending on how different assets and earnings streams are ultimately valued. In setting a price target aligned with the latest bid level, he is effectively signaling that the stock already reflects much of the takeout and break-up value embedded in current expectations.

At the same time, Joseph Michael highlights that a meaningful portion of the additional value in a break-up case hinges on less certain elements, such as the monetization of the property portfolio and the size and realization of potential synergies for an acquirer. He emphasizes that, in the near term, the stock is likely to move more on news around bids and corporate actions than on underlying operational performance or fundamentals. If the current bid process stalls or fails, there is a risk that the share price could drift back toward levels more closely tied to its core earnings profile and peer multiples. Taken together, these considerations lead him to maintain a neutral, Hold (Equal-weight) stance rather than advocating a more aggressive Buy or Sell position.

According to TipRanks, Michael is ranked #1641 out of 11984 analysts.

In another report released on January 15, TipRanks – Google also reiterated a Hold rating on the stock with a A$32.00 price target.