It certainly has been a great month for Allkem Ltd (ASX: AKE) shares.
Since this time in April, the lithium miner's shares have hurtled 28% higher to close yesterday's session at $14.79.
This has been driven largely by news that the company plans to merge with fellow lithium giant Livent Corp (NYSE: LTHM).
Where next for Allkem shares?
The good news is that one leading broker believes there are more gains to come for investors. That's despite its analysts suggesting that Allkem shareholders might not be getting the better end of the deal.
According to a note out of Bell Potter, its analysts have retained their buy rating with a $19.20 price target. This implies potential upside of 30% for Allkem shares over the next 12 months from current levels.
What did the broker say?
As I mentioned above, the broker feels that Livent shareholders are the big winners from the merger agreement. It said:
Longer term, we don't believe AKE shareholder's ownership of NewCo (56%) reflects the company's stronger earnings profile and dominant upstream position. While we don't see it as a bad deal for AKE, it looks like a great deal for LTHM through strengthening its upstream capabilities, retaining key executive positions and receiving what we view as a disproportionately large share of NewCo.
Nevertheless, Bell Potter remains positive enough to maintain its buy rating. Particularly given how the US listing is likely to result in a valuation re-rating. It concludes:
AKE is now in-play; we think it is likely the LTHM merger will proceed and are not confident that an interloper will emerge. On a stand-alone basis the company has a strong production and earnings growth profile into what we expect to be an exceptionally strong market for lithium. Combining with LTHM and the NYSE listing could see an earnings multiple uplift. AKE is trading at a slight discount to the implied deal value, which we expect will close if deal certainty improves.
