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BHP - BHP Group

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ducati
The BRICs are indeed consumption economies.
While China is clearly a manufacturing behemoth, it is also consuming the lion's share of its commodity imports - not just copper and steel, but foodstuffs.
It won't be too long before China overtakes the US in annual automobile numbers added to their roads, although the US will be the dominant oil consumer for at least the next 15 years.
What data is telling you otherwise?
It seems that some fools can't see the writing on the Great Wall.
 
ducati916 said:
BHP may well be superior to it's competitors, no argument. However, the current valuation of BHP is pricing in a continuation of the current commodity bull market, if that conclusion proves to be false, the share-price of BHP could revalue lower.
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My old grandpa used to say,...

"If the dog hadn't of stopped it would have caught the rat".............
 
rederob said:
ducati
The BRICs are indeed consumption economies.

Yes, they consume, but due to their inherent current relative poverty, not proportional to their function as a cheap manufacturing base for Western economies, principally the US.

This is running into a number of problems currently;
*the falling US$
*trade tariffs that are looking to be passed by US Congress



While China is clearly a manufacturing behemoth, it is also consuming the lion's share of its commodity imports - not just copper and steel, but foodstuffs.

Food, certainly, as the environmental damage & pollution is catastrophic, the land cannot produce enough, a disaster unwinding.

As to the other "commodities" an example; Chongquing, due to massive central government subsidies has grown by 14%. 80% of this growth has come from government and government controlled Banks. "Consumption" has been an aneamic 20%. The question must be, if the subsidy spigot is turned off, or turned down, what happens to this city and others like it? [Economist]



It won't be too long before China overtakes the US in annual automobile numbers added to their roads, although the US will be the dominant oil consumer for at least the next 15 years.
What data is telling you otherwise?

Exports: [CIA Factbook]
$974 billion f.o.b. (2006 est.)
Exports - commodities:
machinery and equipment, plastics, optical and medical equipment, iron and steel
Exports - partners:
US 21%, Hong Kong 16%, Japan 9.5%, South Korea 4.6%, Germany 4.2% (2006)
Imports:
$777.9 billion f.o.b. (2006 est.)

Looking at the data, the surplus, as we know is largely generated by the US. As mentioned, conditions are now changing, Congress wants to move to isolationist policies, trade tariffs are on the way, US$ falling, none of this bodes well for China currently.



It seems that some fools can't see the writing on the Great Wall.
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As per usual, your post is full of opinion, very light on data, and the usual personal references. If you have access to actual data, it would actually make interesting reading, rather than endless opinion supported by nothing.
 
ducati
This is the BHP thread.
If you want to raise other matters exclusive of BHP, you can do it via another thread.
Your point about some of my posts being light on data is deliberately the case.
When your data proves my point, and you contend the opposite, there is little point adding more information: You will similarly recreate the data's "meaning" to suit yourself.

My reality here is simple.
BHP is in the superleague of hard commodity producers, and China is the superpower of global consumers.
If China cannot maintain its consuption patterns, perhaps because of an impending global recession, the warning bells will sound soon and loud.
Unless of course we all wake up tomorrow to nothing, or just don't wake at all.

I run off simple probabilities.
They place a trend continuation for BHP as a reasonable probability - from a long term perspective.
Then again, as Greenspan yesterday noted, the probability of a US recession perked up to around 30%, but he sees it less that 50%.

The Chinese save around 40% of their income.
Americans are in debt to the tune of $64,000 per taxpayer!
Some numbers and charts that present the dire state of US affairs:
http://www.earth-policy.org/Updates/2006/Update62_data.htm

The Chinese are increasing their rates of internal consumtion of manufactured goods at a very rapid pace. Despite their relatively low per capita incomes, in 2000 they overtook the US in ownership of fridges and tvs. This year they will probably put more cars on the road than America.
 
$40

please, keep speculating on how BHP is overvalued and going to collapse soon, its just going to sail higher the more you deny it LOL!

Rio should surge past all-time highs soon since they tend to track each other, $110 soon!
 
ducati916 said:
As per usual, your post is full of opinion, very light on data, and the usual personal references. If you have access to actual data, it would actually make interesting reading, rather than endless opinion supported by nothing.
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If we can rely on today's closing price of BHP as but one of the "data" samples, ducati might find that his longstanding analysis in this thread has been - not to put too fine a point on it - deficient.
Should BHP hit a further record high on Friday I will be seriously tempted to take profits.
 
Next week will be an interesting one, as it corresponds with last years low of $24, so many of those parcels will be coming up to 12 months old and hence into CGT discount land. I was only one of the many.


Cheers


BT
 
rederob said:
Should BHP hit a further record high on Friday I will be seriously tempted to take profits.
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I have been seriously thinking about this too. I couldnt be happier with my gains on bhp in close to 2 years. without it, my folio would be a lot lot worse.
 
Hey guys,
As you may know OSH went up 11% the other day based on take over speculation.
My question to those of you who are in on BHP is, how likely do you think it is that BHP would be looking at OSH as a possible take over?
The reason I ask is because the other night on Lateline Business Carlo Caiani from Caiani & Co said "BHP Billiton, among others, had been looking at it for a while. We're surprised actually it hasn't gone before."
Any feedback would be appreciated.
Heres a video from lateline business - http://www.abc.net.au/reslib/200709/r184144_683326.asx
and heres the link to transcript - http://www.abc.net.au/lateline/business/items/200709/s2035796.htm

Cheers
 
Minty
My view is that OSH is not a large enougher oil/gas player to fit BHP's resource-base standard.
My view has been for some years now that WPL would be in BHP's sights.
However, I suspect that the present bull run in oil will catapult WPL out of range - I have a near term price target of $50 for WPL and any takeover speculation (were it to come from BHP) - would add another 20%: Too expensive!
 
Looks like it could be another strong performance by the big blue-chip today (i.e. as long as the run yesterday did not factor in a likely rise in metals overnight as a result of the fed cut).
•BHP up 2.67% in US
•Dow (0.5%) & FTSE (2.8%) both up overnight
•Cu up 3.87% to $US3.58/lb, Ni up a whopping 9.39% to $US15.07/lb and Brent Crude up slightly.
 
BHP is doing great first up this morning UP $41.31 +$0.87 +2.15% with high of $41.50

BHP BHP Company Research $41.31 +$0.87 +2.15% 15,938,771 shares $661,266,617 20-Sep 10:03:53
 
Its totally gonna collapse soon,

BHP is over-valued and deserves to be $5 a share even though its going to be printing money out for the next 15 years..











/end sarcasm
 
ducati916 said:
Exports: [CIA Factbook]
$974 billion f.o.b. (2006 est.)
Exports - commodities:
machinery and equipment, plastics, optical and medical equipment, iron and steel
Exports - partners:
US 21%, Hong Kong 16%, Japan 9.5%, South Korea 4.6%, Germany 4.2% (2006)
Imports:
$777.9 billion f.o.b. (2006 est.)
Looking at the data, the surplus, as we know is largely generated by the US. As mentioned, conditions are now changing, Congress wants to move to isolationist policies, trade tariffs are on the way, US$ falling, none of this bodes well for China currently.
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I posted earlier that ducati's analysis was "deficient".
In the above example you can see that its exports to the US are a mere 5% greater than exports to Hong Kong.
The more intelligent analyst will have quickly picked up the fact that Hong Kong is part of China. That is not to say the data is not reliable - it is.
But ducati is incapable of fair or reasonable analysis.
He believes that the US is the key to Chinese prosperity. Yet the data he relies on (CIA Factbook) apparently did not tell him that 47% of exports were to Asia, and 22% were to Europe.
So when ducati says the surplus, as we know is largely generated by the US he either was lying, or was incapable of understanding the available data.
For those interested, these links are useful:
http://www.delchn.cec.eu.int/en/eu_china_wto/12.2006.World.xls
http://www.delchn.cec.eu.int/en/eu_china_wto/EU China Trade Statistics.htm
http://www.china.org.cn/e-company/web1.htm
Had he gone a step further he would have noticed that the rate of change in exports was greater for Europe than the US, to the extent that extrapolation of the data suggest that in 2007 Europe will have replaced the US in export dominance.

Let's now place BHP into this context.
BHP presently derives 20% of its sales revenue from China, about 25% from Europe, and around 5% from the US. Australia is more important than the US for BHP's revenue stream (Japan is twice as important as the US).
China and India are becoming increasingly important to BHP, at the expense of all other trading partners.
The US is but a small bit player as far as BHP is concerned.

That is not to say the US is not important in other regards.
BHP's commodities are USD denominated and every one cent decrease in value of the USD knocks about US$60m off BHP's bottom line.
Apart from reserve currency status, the US continues to dominate global financial markets. So glitches like the sub-prime fiasco, and an impending recession will have global ramifications.
Other threads canvas those themes in more detail.
 
Why are our mining companies earnings generally denominated in USD?

Seems a bit silly to me as that currency is getting weaker and weaker.
 
vishalt said:
Why are our mining companies earnings generally denominated in USD?

Seems a bit silly to me as that currency is getting weaker and weaker.
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Because the commodities markets trade in USD e.g. basemetals, precious metals, oil, coal, uranium, iron ore etc?

thx

MS

Earnings and Dividends Forecast (cents per share)
2007 2008 2009 2010
EPS 275.0 327.2 361.2 331.6
DPS 55.4 64.4 72.8 75.1
 
while I still think the future earnings may stay strong, my finger is hovering over the sell button.
Now that im in London though I cant watch it cause im sleeping!
 
barnz2k said:
while I still think the future earnings may stay strong, my finger is hovering over the sell button.
Now that im in London though I cant watch it cause im sleeping!
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remember the time BHP was at $20 and looked too strong? well its @ $40 now, looking strong, still printing massive amounts of money, and its given a 100% return on US ADR's as opposed to the 60% on the ASX. I've noticed the ASX tends to catch up to the ADR's, just hold onto it lol, itll be $50/$60 by halfway next year IMO, i'm certainly pursuing it in Rio Tinto
 
BSD said:
Perhaps valuation and treasury management techniques have moved a little since Graham and Co created these 'rules of thumb'.

We aren't valuing a corner-store here.
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Hi BSD,

I've given your post a lot of thought, and have since done a litle more than Graham's litmus test to value a company.

The nagging question is this : what is the value of BHP?

Not the price. Value.

From the value, you can then determine, with one's calculate assumptions, how over or undervalued BHP is.

Here's a few assumptions : I hold BHP for 10 years, and I look at BHP's earnings for the past 10 years. My expected Rate of Return is 15% p.a. holding BHP for these 10 years. And I'm using a discount rate (pessimistic) of 7.25% -- that of the Australian gov bond yield with a little more added to it.

Now. Using Ducati's concerns with accounting (I went through the balance sheets and cash flows with the ANN as well), I discount, very heavily, the 2007 EPS and also normalize the EPS in 1999 so that the EPS difference from 1999 to 2000 is not 400% (!). I then tabulate 3 10-year histories of BHP : Their past EPS, P/E, dividend %. I then tabulate their 10-year forward of their EPS weighted by their discount rate.

In short, BHP is underpriced by 23.52%. Maximum price I would pay for a share of BHP to obtain 15% rate of return over 10 years is $47.91 (current price as of time of writing is $38.79). Current Rate of return is 17.11%.

Even with very pessimistic EPS from the 2007 annual and normalization of the EPS at 1999, I did not go through the previous 9 years of annual reports with ducati's deligence to reduce(?)/increase each year's EPS, so I took at face value what Huntley provided.

But because it fit my profile of 10 year hold for 15% (at least) of rate of return, I will still buy BHP, and be prepared for fluctuations of at least 50% decrease over 10 years.

Having said that, I am extremely worried by the accounting practices of BHP, especially those highlighted by ducati and published. Without such dodgy practices, the EPS already looks nice enough, and one can only guess why they chose to do so (hide their intent in their ANN). Further worries are their working asset and liability ratios.

This worry can be substantiated in my valuation of BHP as well. In the 2008 annual report, if the correct (meaning -- going through the bal and cashflow and correctly pinpoint what actual profits are) EPS is only 11% more than 2007's (instead of the average of 27.4%), then BHP would already be just about $1 above what I would pay for a 10 year hold @ 15% RR.

I will be watching their 1/2 year report very, very closely.

Question : I would like to compare results with anyone who values companys using www.stockval.com.au . Apparently they use these same methods.

Note : Do NOT discount worries about very solid looking companies, even if it's BHP. If one were to look at this article concerning the 1987 crash, one can read somewhere at the bottom (favourite parts in bold):

One of the more compelling arguments for this theory was published in the Harvard Business Review in 1988. The authors—Avner Arbel, Steven Carvell, and Erik Postnieks (all professors at Cornell)—wrote that the crash “was almost nothing of what so many analysts, investors, and observers believe it was. Instead of a panic, it was the restoration of sobriety and rationality.” The authors applied a pricing formula developed by Benjamin Graham, the Columbia University scholar and mentor to Warren Buffett, to 1,800 publicly traded companies. They looked at the companies’ valuations a year before the crash, two weeks before, and the day after. Their model indicated the overall market (not just the 30 stocks of the Dow) was overvalued by about 17 percent. The Wilshire 5000, an index that encompasses virtually every publicly traded stock, declined 18 percent. The title of their article: “The Smart Crash of October 19th.”
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(I can not discount Graham's foundations. He covers periods even before 1929)
 
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