BHP - BHP Group
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Hows your gumnut collection going? You still waiting for your suggested $23? Did it turn out to be one of those "classical" head and shoulders?
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Dont get too excited. Based on its pattern, that was a continuation gap, expect to see some strong price action in the next few trading days, or that gap, in all probability, will be closed.
So do you mean, it will rise then fall sharply again? How do you come up with your analysis? Please share.
thanks
michael_selway
Coal & Phosphate, thats it!
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Hi yep it will good to see what the reponse is. However looking at the current forward numbers. BHP is worth about $40.00 ot less if you take into accoutn lowist Dividend Yield. Unless they commodity prices increase alot from here etc
Earnings and Dividends Forecast (cents per share)
2007 2008 2009 2010
EPS 275.0 300.0 400.7 405.5
DPS 55.4 68.0 75.9 87.2
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Michael, as far as fundamentals, based on those forecasts, current balance sheet, I too value BHP <$40.
Overule, basically, there are a few types of gaps. All are filled, except 2, these are breakaway and continutation gaps.
Breakaway gaps, "gap up" after a consolidation pattern. Since BHP SP was rising previous to the gap up today, it must be a continuation gap (or not?).
My analysis is not saying it will rise again. I am simply stating, the only way for this to be a continuation gap, is for the price to rise over the next few trading days. If price falls (obviously the gap will be closed), if it now starts to move sideways, you would look for the gap to close (SP fall).
I.e. If holding (long) BHP, you will want to see the SP rising. If this does not happen and price now looses upward momentum and moves sideways, look for the gap to close (sell before the gap closes).
This is simple gap theory, correct me if Im wrong.
I am curious as to why on fundamentals BHP is worth only $40 according to some of the people here.
It is trading (according to Comsec) on modest P/E's of about 13.5. Furthermore, there is huge growth expected for the next financial year in earnings. What happens after that is unpredictable - BUT given the fact that half the world, ie India & China, are going through an Industrial Revolution, it is becoming more accepted that BHP will have very good growth for the foreseeable future even after 2008/9.
A strong argument can be put that BHP on fundamentals is worth substantially more than $40.
It is trading (according to Comsec) on modest P/E's of about 13.5. Furthermore, there is huge growth expected for the next financial year in earnings. What happens after that is unpredictable - BUT given the fact that half the world, ie India & China, are going through an Industrial Revolution, it is becoming more accepted that BHP will have very good growth for the foreseeable future even after 2008/9.
A strong argument can be put that BHP on fundamentals is worth substantially more than $40.
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I use a simple formula to calculate "value", however, its definately FAR from an exact science. Just a rough idea. A good start is Michaels formula in his signature.
My mistake also, I used the wrong projected earnings (I see they have been revised upwards?). Commodity volatility means I use a higher discount rate when converting back to present value.
However, with these new figures, I have BHP >$40. Not a bad fundamental price at all, could well be a continuation gap. Of course, commodity price movements are going to affect the SP of BHP far more than any T/A IMO and these are looking strong so far tonight from a quick glance. Dr Copper always the best to watch for a general idea.
My mistake also, I used the wrong projected earnings (I see they have been revised upwards?). Commodity volatility means I use a higher discount rate when converting back to present value.
However, with these new figures, I have BHP >$40. Not a bad fundamental price at all, could well be a continuation gap. Of course, commodity price movements are going to affect the SP of BHP far more than any T/A IMO and these are looking strong so far tonight from a quick glance. Dr Copper always the best to watch for a general idea.
I always tend to think that the market will determine the price of a stock. Up over 4 percent again on the lse, should see similiar gains here today. Stock has had a stellar performance over last two weeks, might be time to take profits later on today.
Really not sure what you are trying to say? Was up over 4 percent friday on the lse, which in response to caused our run on monday. Was also up similiar amounts monday night and again so last night on the lse on talk of baosteel preparing to take a larger stake than the one taken in rio. So not sure how they were mirroring our gain unless they had a crystal ball? Anywhos, looks good for the bulls, talk of china preparing to take a stake would explain the recent run and should bode welll for the short term at least.
Sean K
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Perhaps probably
cautious: lol), not going down any more, but not necessarily up. Another higher low might help. 
Attachments
China chasing large stake in BHP Billiton
By Rowan Callick and Dennis Shanahan
April 09, 2008 01:49am
http://www.news.com.au/business/story/0,23636,23509172-462,00.html
TENSIONS between Australia and China are set to rise as Kevin Rudd arrives in Beijing today amid revelations that China is preparing to buy a multi-billion-dollar stake in BHP Billiton (bhp.ASX:Quote,News).
Sources in Beijing said China was in the early stages of planning to snare a bigger chunk of BHP than the 9 per cent stake in rival Rio Tinto (rio.ASX:Quote,News) it bought with US-based Alcoa for $15 billion in a stock market raid in February.
News of the plan - part of an attempt by China to intervene in BHP's (bhp.ASX:Quote,News) takeover of Rio to create one of the world's biggest companies - follows a warning from the Prime Minister to the Chinese Government and industry that they will have to accept higher coal, iron ore and natural gas prices and cannot expect intervention from Canberra in the raw materials market.
On Monday, giant South Korean steelmaker Posco said it had agreed to triple the price it paid for Australian coal this year, raising expectations that Chinese steel mills would have to follow suit.
The Posco deal also increased the likelihood that China would have to pay BHP and Rio 70-85per cent more for Australian iron ore - the other key ingredient in steelmaking - this year.
As he prepared to travel from London to Beijing on the last leg of his 17-day world tour, Mr Rudd said that at times China got good deals and at other times Australian producers were better off.
"That's life in a commodities market," Mr Rudd told a 1000-strong audience at the London School of Economics.
"Our challenge is to make sure that it is conducted on market principles and in the overall framework of long-term security of what's supplied, as we have over many decades with our friends in Japan.
"Sometimes the buyers see the market prices as too high and sometimes the producers see them as too high. China did well out of the LNG contract with Australia while iron ore is the reverse."
China and its state-owned steel companies are deeply worried about the effect of the $400billion merger between BHP and Rio on iron ore and coal markets.
The plan to buy into BHP means foreign investment and regulatory controls are likely to become a crucial agenda item in Mr Rudd's talks with Chinese President Hu Jintao and Premier Wen Jiabao this week.
The price of raw materials, climate change, China's role in Tibet and the chaos engulfing the Olympic torch relay also loom as potential controversies on Mr Rudd's four-day visit.
The plan to buy a stake in BHP is under development, with Chinese authorities yet to determine which state-owned financial institution or steel mill - such as the largest, Baosteel- might take the lead role in seeking sellers within BHP's diverse shareholder base.
It is unlikely to be Chinalco, the aluminium giant that led the raid on Rio, complicating BHP's protracted takeover bid.
The plan reflects the strong view among China's planners that its steelmakers should become ever more deeply entrenched partners of global iron ore producers.
The Government is likely to use Mr Rudd's visit to check whether Canberra is contemplating strengthening or relaxing Foreign Investment Review Board procedures that relate to sovereign wealth funds or other state-owned enterprises.
This issue has already become the subject of intense lobbying in Australia in recent weeks.
While China wishes to ensure its government-owned companies can operate without fear or hindrance within Australia, questions are also being asked as to the consequences of having state-owned firms pursue Chinese government policy inside Australia.
Australian firms also remain severely constrained in investing within China, where the resources sector provides only limited scope for foreign involvement.
What is the max % a foreign entity can hold in Australian Law?
If they hold around 15% will they be able to block the BHP-RIO deal?
Will the un-braking on the BHP stock because of merger talks lift the stock higher?
The current P/E is around 14 ( normal level), so I guess it has not taken in to account the increase in the prices of commodoties? Coal 200% increase, Iron ore 60%> increase etc.
Also their Olympic dam, gas and oil projects seem to be not fully taken into account the current price.
I am new to fundamental analysis , so please be patient
If they hold around 15% will they be able to block the BHP-RIO deal?
Will the un-braking on the BHP stock because of merger talks lift the stock higher?
The current P/E is around 14 ( normal level), so I guess it has not taken in to account the increase in the prices of commodoties? Coal 200% increase, Iron ore 60%> increase etc.
Also their Olympic dam, gas and oil projects seem to be not fully taken into account the current price.
I am new to fundamental analysis , so please be patient
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BHP is doing well, another gap today, perhaps a measuring gap.......which by definition, means the price has quiet a bit higher to go yet!
I bought in just above $40 with a stop around $39 for a very safe play.
Will watch price action closely, would want this run to continue sharp and fast, perhaps an exhaustion gap further up, followed by an island reversal just to make this a textbook example!
But yes, the China news is definately the driver!
I bought in just above $40 with a stop around $39 for a very safe play.
Will watch price action closely, would want this run to continue sharp and fast, perhaps an exhaustion gap further up, followed by an island reversal just to make this a textbook example!
But yes, the China news is definately the driver!
The fact that the Chinese are keen to get their hands on resource companies shows that they clearly view these companies as undervalued.
Yes, I realise that the Chinese are the ones driving up the prices of commodities, but if the companies themselves weren't viewed as undervalued, then buying them would be a zero sum gain.
Alternative explanation: the Chinese are buying stakes in them to prevent the BHP/Rio takeover. But I actually don't think that is their prime motivation.
Yes, I realise that the Chinese are the ones driving up the prices of commodities, but if the companies themselves weren't viewed as undervalued, then buying them would be a zero sum gain.
Alternative explanation: the Chinese are buying stakes in them to prevent the BHP/Rio takeover. But I actually don't think that is their prime motivation.
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I would moreso say trying to cap prices on commodity imports (especially with inflation high in China at present I beleive). They are only concerned with one thing, their economy. Not the companies in which they buy (of course, to an extent).
At least thats my take on it.
At least thats my take on it.
Disagree completely.
This would make it into a zero sum game. If they could reduce prices of commodities, then there would be a corresponding decrease in the profitability & market value of the commodity companies.
Just like a pub that buys a brewery. If they got the brewery to sell the pub beer for cheap, increases the profitablity of the pub, but at the expense of the brewery. Zero sum game.
All of which is theoretical. No way buying a minority stake in these commodity companies is going to be able to reduce commodity prices.
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Block merger/takeover, decreasing monopoly/oligopoly power.
Zero sum game is better than a negative sum game, right.......? Hedging........