BHP Valuations

[JustaReader]

Well folks since there has been a lot of noise re. BHP valuations, thought I'll join the bandwagon with some simple math.

Sahres in Issue 3.494M
P/E 15x

Market Cap at price/share (in AUD)

Shares in Issue (in Millions) 3,494 3,494 3,494
Share Price (AUD) 30.30 34.00 50.00
Market cap (AUD Millions) 105,868 118,796 174,700

Net Earnings (estimated in B) 7B 8B 11.6B

 

[markrmau]

It is not appropriate to use simple ratios such as P/E to value mining stocks.

Many factors need to be taken into account - mine (and oil well / gas field) life, future commodity prices etc. Mature mining stocks should in general trade at a discount to the general market PE because of these risks.

Having said that, we are in the middle (or possibly towards the end) of a massive speculative bubble in materials, and BHP could very well trade at $40-$50 by the end of year. No one knows when it will end though.

 

[michael_selway]

Well folks since there has been a lot of noise re. BHP valuations, thought I'll join the bandwagon with some simple math.

Sahres in Issue 3.494M
P/E 15x

Market Cap at price/share (in AUD)

Shares in Issue (in Millions) 3,494 3,494 3,494
Share Price (AUD) 30.30 34.00 50.00
Market cap (AUD Millions) 105,868 118,796 174,700

Net Earnings (estimated in B) 7B 8B 11.6B

Wait how did u get this?

"Net Earnings (estimated in B) 7B 8B 11.6B"

it appears way off to current consensus forecast, esp the 2008 one 11.6B? Imo forecast 7B, 8B, 7B is about right for now (2006-2008)

Earnings and Dividends Forecast (cents per share)
2005 2006 2007 2008
EPS 128.4 214.6 235.3 223.1
DPS 36.7 47.8 51.5 55.1

Also 15 PE is quite high for a blue chip currently, should be around 13-14?

thx

MS

 

[JustaReader]

Michael,

The earnings numbers are not forecasts, just an extrapolation of P/E and stock price. I agree with you the 7B - 8B is in line and so, price rage up to 34 in simple math terms looks realistic.

How many of you out there think 50 by y/e is realistic?

JAR

 

[ctp6360]

You are asking us to say whether a 60% increase of a Blue Chip stock is LIKELY by the end of the year, I think if we could make predictions like that we would all be billionaires!

 

[nizar]

ctp6360,

regarding billionaires, u are pretty close!

BHP is the BEST company to own and in $$$$$$$$$ terms they are benefiting the most from this commodity boom.....

look how much COPPER they are producing... even if copper retreats to around 2,50.... still very profitable...

look at it this way:

Olympic Dam was profitable when copper was at 70c/lb, uranium at $7/lb and gold at $250/oz...

and expansions are going on right now to more than double olympic dam copper output to 600ktonnes by 2010 and uranium will be 40,000tonnes then, only a by-product but a very profitable one.... and i wonder how much resources they have there... maybe 50years worth...

i personally reckon their NPAT will be $10billion this year

 

[ctp6360]

well I sure hope you're right nizar because I hold a lot of BHP!!!! I'm looking forward to the rest of the year

 

[RichKid]

Just as a friendly reminder, if this thread is to continue separately it should really focus on the valuation methodolog/figures for BHP, if it doesn't it might as well go in the general BHP thread. A focused study makes the analysis more valuable and justifies a separate thread, most threads have some sort of fundamental valuation debate in it so it wont be unusual to merge this imo.

I thought I'd mention that, no real drama yet but just in case we stray from the topic. Stating assumptions underlying valuations or certain figures would also help. If it's commodity prices which are the issue then we have existing threads for that too. Some overlap is ok.