BHP - BHP Group

[Bush Trader]

Latest broker Ratings on BHP

Excuse the format

Cheers

BT

Broker Date Rating Recommendation Target Price % to Reach Target

Citi 06-Nov-07 3 Hold, Medium Risk $48.00 11.0%
On the plus side the price outlook for thermal and metallurgical coal look good but this continues to be offset by capacity constraints.
The result is no change to the broker's Hold rating.


Merrill Lynch 05-Nov-07 3 Neutral, Medium Risk - -

After a BHP site tour in the Hunter Valley, analysts made predictions about the coal business, saying that the NGIG terminal at Newcastle is unlikely to be open until 2011 – this will influence BHP’s export volumes out of Newcastle.
BHP Billiton continues to see a tight market for thermal coal due to infrastructure constraints and strong demand from China and India. Analysts suggest that an index like BHP’s energy coal price index, could give the company competitive advantage in the iron ore market.


Macquarie 05-Nov-07 3 Neutral $42.48 - 1.8%

The broker has increased its 4Q07 oil price forecast to US$79.83/bbl and 1Q08 to US$76.00/bbl. These are 20% increases and clearly the broker is still holding out for a pullback, while acknowledging geopolitical tensions.
Target rises from $41.41 to $42.48.


UBS 05-Nov-07 1 Buy $52.00 20.3%

After the final site visit to New South Wales Coal and briefing on Energy coal, the broker envisages no material change to near term earnings but believes there is potential for upside to earnings beyond FY09 as capacity is lifted by new projects.
O
verall, the broker has maintained the buy rating to reflect upside to pricing in thermal and coking coal, and iron ore. The broker has noted that recently Xstrata settled thermal coal contracts at US$78 per ton which is higher than its forecast of US$70 per ton for FY08.


Credit Suisse 02-Nov-07 3 Neutral $45.00 4.1%

Analysts are still reporting from the Australian asset tour. They note for BHP's Bowen Basin operations India is much more a focus than for the iron ore business which is much more China oriented.

Also, constraint issues in Queensland have more to do with rail capacity than port. This means BHP will be constrained like the rest of the industry, albeit to a lesser degree, the analysts believe, at least through 2010.

No changes were made.


JP Morgan 30-Oct-07 1 Overweight $47.00 8.7%

Following a site visit to the comapny's WA iron ore operations the broker notes the growth outlook for the division appears good, though higher costs are increasingly becoming an issue.

ABN Amro 24-Oct-07 1 Buy $51.13 18.2%
Target $51.13 (was $51.22). The company's production report was a little below what the broker had expected, the result being a 5.5% cut to its earnings forecast for the current year.
Despite this its Buy rating has been maintained given expected future production growth.


Deutsche Bank 24-Oct-07 1 Buy $46.30 7.1%
September quarter production report showed a bit of a slow start into the new fiscal year, the analysts comment, but since most of it was related to maintenance it's no cause for alarm.

The broker appears to be positive about 2008 price prospects for oil, copper, coal and iron ore and thus the Buy rating remains firmly in place. Projected strong cashflow and potential for capital return are two other reasons cited.


Aspect Huntley 27-Apr-07 3 Downgrade to Hold from Accumulate - -
Production for the quarter was marginally lower than expected but this is offset by higher commodity prices, so Aspect Huntley has lifted its earnings estimates slightly this year and by around 10% in FY08.
It also suggests the stock is currently slightly better value than Rio Tinto (RIO) and has a better balance of commodities, but has downgraded its rating regardless.




Last Change +/- Change % Volume
$43.24
8 Nov 2007 -1.6200 - 3.61% 24,830,685
Open High Low
$43.42 $43.65 $42.94

 

[hacheln_mice]

Hi h_m,

I believe your summation to be correct and there is money to be made if range trading suits you. I'm having a shot at it and it's a bit 2 steps forward and 1 step back, but OK on balance. And I reckon BHP is likely to break through upwards rather than downwards. We'll just have to see what the rest of the world thinks.

Happy trading,

hector

I'm personally gonna wait it out and buy when it tags 41.3-41.8 because the fib retracement also coincides with a WEEKLY gap at the 41.5 level.

 

[Bush Trader]

I'm personally gonna wait it out and buy when it tags 41.3-41.8 because the fib retracement also coincides with a WEEKLY gap at the 41.5 level.

Why not just wait for a sentiment shake out - take a look a the LME Copper price chart, and the fundamentalist comentaries on the red metal. That should unnerve a few.


Cheers


BT

 

[vishalt]

finally BHP is getting some heavy selling, time to buy buy buy!

rumours of BHP taking over Rio came around today again, does anyone think thats even possible? itd require over $220 billion, both companies prices are high and after the sub-prime fallout yikes!

 

[Fung]

Ha! That includes me BT, so BHP better go up tomorrow or I will be walking around barefoot with my pockets turned out.

Cheers

I start regreting that I fill up the shares too early. Seems like I will need to flow on the river for a while, hope there's no waterfall

Maybe I am thinking too short-term

 

[hacheln_mice]

Well, given the BHP/RIO takeover news, I don't think I'll be seeing $41.5 anytime soon. I reckon I've still got a shot at buying back below my selling price though.

 

[M34N]

Well, given the BHP/RIO takeover news, I don't think I'll be seeing $41.5 anytime soon. I reckon I've still got a shot at buying back below my selling price though.

Could go either way I reckon, watching the reaction on the FTSE tonight, it went from -3.5% pre-announcement, +3.5% after the announcement, then it went to -2% about 30-40 mins after that, and now it's basically flat again with a slight positive bias.

A lot may see it as a negative because it would require a LOT of money and with all this sub-prime mortgage problems in the US, who knows. But really, if anyone can afford to do a takeover like this, it's really only the resource stocks with the money and financial backing that can pull it off. Will be curious to see if any more details come out on who will help fund it, and how far the talks have gone between both RIO and BHP.

 

[Jimminy]

I think you'll see the perfect buying opportunity today for BHP....

The market will push BHP down and Rio up, yet the cost savings represented to BHP would be very very significant. Interesting times ahead.

I don't think it will happen, and that Xstrata will be quivering in the corner.

 

[Mr_T]

This is scary stuff.
Specifically what is frigtening here?

a) The fact that BHP wants to takeover via a scrip for scrip as opposed to cash. A company that values its shares tends to raise the cash for a takeover rather than using scrip for scrip. Like BHP did with Western Mining - and what a good move that was, paying cash rather than its undervalued shares.

Is this a sign BHP management doesn't beleive its shares are undervalued?

b) There are few things more frightening than companies with too much money. Especially ones run by people who think that they just know how to spend it wisely.They wouldn't want to to do anything sensible like return the money to shareholders through higher dividends or share buyback (the latter option was a very successful one under the guidance of the brilliant Chip Goodyear - please come back!).

History is full of examples of companies with too much money squandering it, like Telstra under the guidance of Ziggy wasting all those billions on Richard Li's PCCW with views of world dominaton. Predictably went pear shaped.

c) Most (though not all) takeover end up with the predator overpaying, whether that be by shares or cash. One notable exception is BHP buying Western Mining, which was one of the steals of the century.

Just look at how TABCORP overpaid for Tab Ltd, and what has happened to its share price ever since - yes, there are many other factors that led to Tabcorp's problems, but this was a huge factor.

Or how well has Daimler Chrysler done since its merger?

Again, every takeover/merger must be seen on its individual merits. Where is the evidence this one is different to most?

d) Are there any synergistic benefits here at all? Is there any evidence that 1 + 1 = 3 for these two companies? If not, then why would BHP bother buying RIO? Just return the surplus money in the form of higher divs/share buybacks, and if shareholders then want to buy RIO Tinto they can. At $110 instead of $130. Or at least they could have.

What synergistic benefits are there here? The main potential benefit I can see is it would give the merged entity the opportunity to have more control of the market share and hence price of certain commodities. But would world wide anti trust laws allow this? In other words, for those commodities where there are potential benfits for a merger, would be most likely to be ones where anit trust laws would apply and so the synergistic benefits would disappear.

Im happy to hear people disagreeing with me. As a matter of fact I encourage everyone to do so.

 

[Jimminy]

What synergistic benefits are there here? The main potential benefit I can see is it would give the merged entity the opportunity to have more control of the market share and hence price of certain commodities.

Im happy to hear people disagreeing with me. As a matter of fact I encourage everyone to do so.

I might have read you wrong, but it sounds as though you find it difficult to see what synergies exist other than the price issue......

But on the anti-trust laws, in Europe which is where CVRD has a big presence I don't see a problem. Africa, with the mineral sands jv could be..

But the competition thing will be heated up by Korea and China - that's a given.

I believe there are real advantages in putting the two companies together, particularly because of the advantages of shared infrastructure in the Western Australian iron ore operations. I am cautious though as this could mean the loss of a rail-line in WA.... very bad.

But the upside is with Rio.... BHP won't get them for under $150. They know that, Rio know that. BHP will have to throw some cash at them.

I'm a BHP shareholder - not sure how to feel on this. Excited for the long term, but now know there is more risk and less upside in the short term on this.

 

[vishalt]

What's frightening is the possibility of Rio ganging up with Teck Cominco/Xstrata/CVRD to buy out Rio Tinto and carve it up instead, I reckon that's scarier and possible!

 

[overule]

Where do you guys think of the BHP's SP is heading in the next month or so ? I am a long-term holder with BHP so i don't really care too much eventhough i incurred some losses (paper loss, ie) but would like to know.

Thanks

 

[Captain_Chaza]

Where do you guys think of the BHP's SP is heading in the next month or so ? I am a long-term holder with BHP so i don't really care too much eventhough i incurred some losses (paper loss, ie) but would like to know.

Thanks

Could RIO now make a bid for BHP??
Stranger things have happened in the past

Sometimes it all depends on who has the better friends

Was it the small BPC that took over the much larger MAY a few tears ago?

Salute and Gods' speed

 

[greenfs]

My son - in - law is Rio junior staffer. His immediate opinion as handed down from higher above is that BHP has taken on 'Mission Impossible'. I think that this is partly reflected in the BHP share price movement today with the market commentators marking management (and the share price) down accordingly.

Havind said that I am sure that everyone will agree that Rio will now stay above $120.

Also, we now know why BHP didn't get JBM.

 

[legs]

I dont know if it has been mentioned yet, as I am too lazy to go back thru the hundreds of posts, but how can the ACCC let this RIO takeover go ahead? Surely it would be against all that the ACCC is set up to protect?

 

[Mr_T]

I dont know if it has been mentioned yet, as I am too lazy to go back thru the hundreds of posts, but how can the ACCC let this RIO takeover go ahead? Surely it would be against all that the ACCC is set up to protect?

Not at all. The Trade Practices Act has exclusions for mergers/takeovers that are in the national interest. As BHP/Rio earn more of their money from exports, it is in the national interest for them to be able to get as good a price as possible for their goods.

In other words, since they are ripping off non-Australians, it's acceptable to the ACCC.

On the other hand, European anti trust laws might not allow it......

 

[Mr_T]

My son - in - law is Rio junior staffer. His immediate opinion as handed down from higher above is that BHP has taken on 'Mission Impossible'. I think that this is partly reflected in the BHP share price movement today with the market commentators marking management (and the share price) down accordingly.

Havind said that I am sure that everyone will agree that Rio will now stay above $120.

Also, we now know why BHP didn't get JBM.

I hope this is true. If I wanted RIO Tinto, I'd buy some shares in it. I don't need BHP to make the acquisitions for me at a higher price than I would pay.

 

[Garpal Gumnut]

This post follows on a discussion on the RIO thread about the cost of investing in high value shares, and my belief that in the not too distant future we will see BHP crack $70 and then $100 and yes in the next two to three years $140. I'm not a funnymentalist, more of a guttist with chartist tendencies, so I include this chart.

It follows BHP and RIO from 1997. It is a monthly bar chart.

It is on a semilog scale for price, so the distance between $10 and $20 is the same as between $20 and $40.

This not a bad way to look at high value shares as it takes the bias against spending a heap of money for just 100 shares out of the equation.

If you'd bought 100 RIO at $87 in August your profit would be $13100 - $8700 which is $4400, which is a 50% gain. , no different than buying 10,000 shares in an 87 cent share, which goes up to $1.31.

So buying BHP at these prices is only a matter of deciding if it will increase in price following an acquisition/merger with RIO.

I think it will. I hold both and would be more fearful of a reversal in RIO's price than in BHP's if the t/o is knocked back.

That is my gut feeling.

On the chart , when I stand a bit back on my verandah where the geckos congregate, from a distance, it seems as if BHP has been doubling at a faster rate than RIO. The horizontal lines double from $4.375 up to $140.

The trend line took off in mid 2003 for BHP a full 12 months before it did for RIO. They parallel each other for most of the time observed back to 1997. However even though RIO has recently reasserted its 2 doubling box advantage over BHP, this is on takeover talk for the former and acquisition fears on the latter's price.

The chart for BHP shows nice uptrending higher highs and higher lows and appears healthy.

It took RIO 2.5 years to double from $30 to $60 from May 2003 to Nov 2005, yet only 10 months for BHP to double from $23.86 in January to $47.70 in October 2007.

So BHP has doubling runs on the board, thus my optimism for BHP's price over the next few years, particularly with its trendline behaving as it has.

gg

 

[overule]

Great post! mate

I agree that BHP has huge potential ahead so i will be filling up as it's dropping. US Markets dropped overnight. Monday might be another great buy for BHP.

 

[Garpal Gumnut]

As befits a stock which over the past 10 years has tracked RIO so closely, I attempted to see if it had similar support and resistance lines to RIO. (see RIO thread for $23 pattern on that stock)

BHP appears to have had good support following resistance at $8, $16, $24, $32, $40 and $48.

If it falls back to $40 I'll be adding to my holdings. Trading the range would seem to be the way to go if it becomes volatile, or hang in and buy if it goes ballistic

As my previous post says I expect it to hit $100 in the next 12-18months.

gg