Is BHP Billiton plc heading to 1,500p after today’s production update?|
|BHP says sees early signs of commodity recovery
|Now Is The Time To Reconsider BHP Billiton by Ivory Wolf:
BHP Billiton has been at the center of much controversy in recent times with the downward spiral of commodity prices, alongside the death of 19 people at the Samarco mine.
Now is the time to strongly reconsider a medium-to-long-term investment proposition in this company for a number of reasons.
BHP Billiton pays a dividend yield of 1.78%, has a manageable debt-to-equity ratio, and possesses a healthy cash flow to "weather the storm" of relatively low commodity prices.
The opportunity presented provides a direct prospect of asymmetric risk/reward with a risk-reward ratio of 2.97, with a clearly defined exit stop loss for BHP Billiton in underlying Australian share ownership.
Context - Why does this opportunity exist? Why is the stock underpriced?
I firmly believe that this is the time to strongly reconsider a medium-to-long-term investment proposition in this company for a number of reasons. Firstly, BHP Billiton is well renowned as a diversified mining company that spreads its exposure to multiple markets and commodities, which is particularly important in the light of current and upcoming events, including the volatile gold and silver markets, as well as the Brexit issues, U.S. Presidential Election, and looming (yet inevitable) interest rate hikes that are speculated towards the end of the year by the U.S. Federal Reserve, all of which are creating increasing uncertainty with each passing day throughout the markets and within the minds of investors, both institutional and individual alike. However, it cannot be ignored that the share price performance of BHP Billiton has been stellar over the past month, in particular, whilst the overall S&P index has essentially tracked sideways to negative, even amongst increased uncertainty in the markets and recent market turmoil. I expect that this will continue as investors search for a "safe haven" for active investment (as an alternative for bonds) to place their hard earned money over the next year. In addition, BHP Billiton is considered a darling "blue chip" Australian stock that is favored strongly by Australian superannuation companies, so I expect that any positive trends in the share price performance will be viewed quite fondly by active managers of such companies who are required to invest their client's funds in the share market and are actively hunting for growth.
From a technical analysis perspective, since the share price had been observed plunging to multi-year lows in January 2016 by the markets for all BHP listings, the company's share price performance has leveled out for the past nine months (Figure 1). It appears that the market's natural tendency of a "short memory" with respect to the Samarco mine tragedy, the recent rising trend in commodity prices such as crude oil and metallurgic coal, and a technical analysis breakout which is currently occurring, indicates that buyer's interest is re-emerging once again.
On a fundamental analysis perspective, BHP Billiton has improving foundations of strength and pays a moderate dividend yield of 1.78%. BHP Billiton's balance sheet possesses a manageable debt-to-equity ratio of 67.1% and a healthy cash flow of A$2.74 per share (which, according to the Health Ranking Model, is below the benchmark 75% for debt-to-equity, and indicates that BHP Billiton has enough cash to cover 3 years' worth of negative cash flows, respectively. These strengths in BHP Billiton's balance sheet are useful in order to "weather the storm" of relatively low commodity prices (compared to historically higher prices) in the face of BHP Billiton's current Earnings Per Share [EPS] of -$1.57, with long-term 5-year EPS growth of -117.2%, which is well below the Intelligent Investor Value Model's benchmark of 30%.
With the investigation of the Samarco mine disaster now complete, and commodity prices now trending upwards, I believe that investors are finally starting to see the true value in BHP Billiton and that all of these factors combined are changing investor perception and driving the catalyst for change. Friday's close is still a far cry short of BHP Billiton's 2015 high of $31.07, which is a reasonable target for the company's share price considering worldwide underlying fundamental demand for commodities.
Looking forward, it is well renowned that Australia's mining industry has been slowing down over the past number of years, but BHP Billiton has the reputation for diversification in order to overcome such slow downs, which could see BHP emerge well on top of its competitors in the mining space. I expect the same can also be said about the upcoming Brexit issues which are expected to be reaching a pinnacle by March 2017 based upon recent news commentary, which will be particularly interesting to observe with respect to how BHP Billiton's company performance will compare to others such as Rio Tinto and Glencore- Although the announcement of the company's first dividend cut in almost thirty years would have been disappointing to shareholders in the first instance, I'm personally impressed that this was accompanied by an abandonment of payout policy/capital spending, which shows that management is committed to long-term development and restructuring of the internal mechanics in keeping the company running smoothly and profitably. In addition, as alluded to earlier in this article, the company is showing incredible resilience with respect to its share price performance in recent times, even when faced with a number of issues from a variety of sources - volatile gold and silver markets, Brexit issues, the U.S. Presidential Election, and looming interest rate hikes. I believe that all these factors combined are true positives for the company and set to increase investor sentiment and BHP Billiton's reputation further, which should be a catalyst for share price appreciation in the future and a great medium-to-long-term investment proposition in this company.
Time frame - Is this a multi-year play, or a short-term opportunity?
It would not be unreasonable to expect a time frame of six to eight months for a steady rate of return once more. This time frame appears to be more aggressive compared to that provided by Stoxline, which currently projects a six-month target of A$26.34 and a one-year target of A$30.76 in the underlying Australian share price for BHP Billiton.
As individual investors, we aren't fully aware of the intricate underlying details "behind closed doors", so it is important to be mindful of anything that just doesn't "feel right" within the financial and technical analyses that you observe. Know your risks, know what's available, and if you don't understand it, don't get involved (or close out of your position). Remain in control - after all, it's your hard earned money that you're working with, isn't it?
In relation to this particular trade in BHP Billiton, the underlying Australian share price movement is already heading in the right direction (up). The first test that the underlying Australian share price will face is the resistance point at A$25.88, which was the swing high formed on 01 September 2015. Should the test of this resistance fail on the first attempt, don't despair, the trade as a whole will not fail unless the support level of A$19.69 is breached (i.e. a close in the underlying share price forms below this point). This provides plenty of "wiggle-room" for the share price to "move".|
|By Robert Stephens - Having fallen by 38% in 2015, BHP Billiton has made a strong comeback in 2016. Its shares have risen by 29% year-to-date to above $23. That’s ahead of resources peers Rio Tinto and Woodside Petroleum. They are up by 16% and 2% respectively in 2016.
But in my view, BHP Billiton could endure a difficult period over the medium term.
A key reason for BHP’s uncertain future is a bearish outlook for iron ore. The steelmaking ingredient hit a high of over US$60 per tonne this year but has since pulled back to below US$55 per tonne. This is despite China’s imports of iron ore increasing in September to 82.5 million tonnes. That’s 2.5% higher than August’s level and shows there is little sign of a slowdown in demand from the world’s largest importer of iron ore.
However, the iron ore price is likely to fall as China trims its steel market overcapacity. Alongside restrictions on the property market, this should cause demand for steel (and iron ore) to fall. In tandem with demand side challenges, iron ore is set to experience a rise in supply in 2017 and 2018.
The world’s largest iron ore producer, Vale, is on track to commence production from its S11D project in January. This could see an additional 90 million metric tons of iron ore shipped per year. Further, the Roy Hill mine is expected to add 56 million tons to global supply. This mix of reduced demand and increased supply of iron ore could cause BHP Billiton’s financial performance to worsen.
One of BHP’s main appeals versus its resources peers is its diversity. However, the outlook for oil means that diversity may not reduce BHP’s overall risk profile. Even though OPEC has agreed to cut production by upwards of 700,000 barrels of oil per day (bopd), the details of the agreement have not been finalised. While the price of oil may be supported until the end of November, there is the potential for a fall if OPEC cannot decide which members will cut production and by how much.
Similarly, the outlook for the copper price is so bearish that the world’s largest copper miner, Codelco, has cut its investment programme. Its 5-year US$25 billion investment plans have been reduced by a further US$2.25 billion. Codelco has called the current copper price outlook as the worst crisis since the company was created in 1976. In my view, further price falls cannot be ruled out and they would hurt BHP’s financial performance.
As well as a challenging outlook for BHP’s three main divisions (iron ore, oil and copper), the company’s shares lack a margin of safety. BHP sports a P/E ratio of 27 using the 2017 financial year’s forecasts. This compares to a P/E for the materials sector of 12.6. Therefore, I believe that BHP’s share price gains thus far in 2016 are unlikely to be repeated in future.|
|Macquarie today reaffirms its outperform investment rating on BHP Billiton PLC (LON:BLT) and set its price target at 1280p.
Story provided by StockMarketWire.com
Deutsche Bank today reaffirms its hold investment rating on BHP Billiton PLC (LON:BLT) and raised its price target to 1290p (from 1230p).
Story provided by StockMarketWire.com|
|BHP Billiton today also announced positive drilling results at the Caicos exploration well in the Gulf of Mexico. Located in Green Canyon 564, this well is approximately 100 miles south of the Louisiana coast in the deep water Gulf of Mexico. Caicos was drilled to a total depth of 30,803 feet and encountered oil in multiple horizons.
"We are encouraged by the Caicos results and are moving to further appraise the area. The next step will be drilling the Wildling well in November. With success at Caicos and Shenzi North, we continue to be optimistic around the opportunity for a commercial development in the area."|
|Off loaded today. Happy to hold vendanta instead...|
|16:35:29 1168.0000 2,637,916 UT 1167.5000 1168.0000 Buy 9,809,435 6,108,137|
|By Mike van Dulken, Head of Research, 23 Sept:
Gold and Oil get significantly more press coverage than the rest of the commodity stable. Unfairly so in our opinion. The former is the safehaven of choice for most, scarcity ensuring its value holds up well during times of economic and market stress and investor uncertainty. It is also sensitive to interest rate policy with higher rates increasing the cost of holding it as a zero-yielding asset. Higher US interest rates increase demand for the US Dollar making dollar-denominated commodities such as the yellow metal more expensive for those using other currencies. Lower rates make it cheaper. Its 2016 recovery has also revived interest in it as a tradeable asset (absent inflation meant it fell out of favour as a traditional hedge, low rates and ineffective stimulus from central banks also failing miserably) following a protracted sell-off from $1800 that began four years ago. We currently trade at $1340, having bounced 30% since December. Interest is understandable.
Oil is now followed forensically on account of its tight links to global growth and as a fuel for industry, plastics etc. Even more so since the sharp sell-off from over $100/barrel two years ago to trade below $30 in January, before bouncing to $50 in June. All because of the global economic slowdown and industry oversupply via innovation such as US shale/fracking. A gradual shift towards alternative energy sources and long lead times means the industry was still bringing more and more production on-line in the face of waning demand. The perfect storm. It also means too much is still being pumped out of the ground. Oil-reliant nations now can’t afford to stop selling as much as possible at prices less than half what they were. OPEC et al. are trying to cobble together a production freeze agreement but the chances are slim, having failed before, and headwinds a plenty. The black stuff has a tendency to both help and hinder the commodity space, so monitoring it is indeed useful.
However, there are plenty of other commodities out there that can be both traded themselves, and whose prices offer early signals about sentiment on global growth and risk appetite for Mining shares. Copper for example has long been seen as a proxy for China growth. Which markets have turned a little more positive on lately thanks to some reassuring data. Now the world’s #2 economy may well be in transition from manufacturer/exporter to services/importer, but demand for the red metal is still a decent smoke signal for growth given its extensive use in all those smart gadgets electronics we love. And we’ve been watching an uptrend for a while now. Iron ore is another one, used to make the steel we need almost everywhere. However, we have moved on from watching just these two, to considering the likes of Aluminium, Zinc and Nickel too. Not so much individually, rather as a general confirmation of demand for industrial metals and the sector trend as a whole.
My point here is that the Miners are topping the FTSE100 league table this week with gains of 10%; Anglo American (AAL; +12%), Glencore (GLEN; +15%), Fresnillo (FRES +10.5%), BHP Billiton (BLT +10.5%), Rio Tinto (RIO; +9.7%) and Randgold Resources (RRS; +8%). Investors are clearly uncertain about the ability of the Fed to deliver a US rate hike in December and, as we explained earlier, lower rates for longer make precious metals cheaper to buy and hold. Uncertainty also fuels demand.
Base/industrial metal miners have outperformed. Their rallies began earlier, in some cases last week, offering great opportunities to run with a largely ignored trend this week. Take a look at the individual charts of the aforementioned Copper, Aluminium, Zinc, Nickel and Iron Ore and you will see that following recent downturns they were already showing signs of finding support and/or already turning days before. Handily welcome early signals for those watching the all-important FTSE Miners.|
|Quiet on here considering the move today. Finally back in profit!|
|one ADR is eaqual to two UK SHARES actually . In for a pounding today I fear .|
|Potential reaction on BHP Billiton (BLT) to analysts' view in its stock
|Often 1 ADR is equal to 2 or more actual shares.|
|So the ADRs are priced differently to UK listed shares? Otherwise the USD / Sterling conversion does not work out based on the prices you mention.|
|USD - I only buy ADRs because they lead the trading pattern and the commodities they sell are all priced in USD too.|
|Idioterna - do you talk in Aussie Dollar or USD terms?|
|It seems to me BHP did a good job in getting rid of the mines it did as South32:
BHP Billiton spin off mining company South32 posts US$1.6 billion loss, as revenue slump by 25%.
The company will pay a dividend of US one cent a share.|
|Yes, it hit $33 as I said it would before the end of August :) I'll not take another position until it is sub $29. But I won't invest for the rest of the cycle until it starts to make some dividend headway. This trading lark is very time consuming, far better to be at the beach or on the golf course.|
|News from the USA............
BHP Billiton is upgraded to Buy from Hold with a $33 price target, up from $28, at Jefferies, amid a "clearly improved" environment for mining fundamentals as well as company-specific factors.
Mining fundamentals have improved with demand stabilizing, a decline in supply, strengthening of balance sheets backed by free cash flow and asset sales, and inexpensive valuations, Jefferies says.
BHP is well positioned relative to most other miners, the firm says, as "a low cost producer with low geopolitical and operational risk and a relatively strong balance sheet."
Jefferies also says BHP's free cash flow is growing, with the company delivering significant reductions in unit costs and lowering its capex spending.
Good brokerage house but many of these mining shares have already done well.......|
|but as with RIO, BHP in USA is lead market and UK price follows US price from about 11.30am UK time each day|
|idioterna- good points you made . Chart still looks ok to me even with the slight dip om friday and 1200 seems to be the next resistance level .|
|Final dividend is 14c per share, down from the Interim of 16c.|