BHP Group released its second-quarter FY21 production report. The results were broadly in line with Ord Minnett’s estimates for iron ore, which saw a 281Mtpa shipment rate, with copper ahead, while coal and petroleum missed our numbers. We make the following observations:
We were disappointed by the higher-than-expected net debt outcome, although some of the working capital buildup should unwind next period. Overall, we believe the stock continues to screen cheap, offering good returns. We are also attracted to the macro-economic backdrop that could see synchronised global growth through the second half of CY21 as economies recover from the COVID-19-related slowdown, supporting commodity demand.
We have lowered our FY21 EPS forecast by 8% after factoring in a number of charges listed by the company. We maintain a 70% dividend payout ratio for the first half, although our DPS estimate has fallen to US83c from US98c as a result of our earnings downgrade.
Despite the softer first-half cash flow outcome, we remain attracted to BHP’s valuation metrics at current share price levels. We maintain our Buy recommendation, while we have trimmed our target price to $52.00 from $53.00.
RESEARCH EDITOR
Walter is the Editor of Ord Minnett's retail investor publications, such as the Opening Bell, Ords Weekly and the Ords Monthly, along with various investment guides and investor information published by Ord Minnett.
Tags
BHP, BHP Group, Mining
Westpac Banking Corporation is the third-largest of the big four commercial banks by market capitalisation and offers a full suite of financial services to more than 13 million customers. Westpac’s first-quarter FY24 profit of $1.8 billion was little changed from the final quarter of FY23, with interest margin pressure and higher bad debts well managed.
Read MoreSuper Retail Group is the owner of the Supercheap Auto, Rebel, BCF and Macpac brands, which have positions in growing high-involvement lifestyle categories of auto, sports and outdoor leisure. The company has more than nine million active loyalty club members, and sells via a network of 716 stores and online. Super Retail’s first-half FY24 sales
Read MoreFortescue is Australia’s No.3. iron ore miner behind Rio Tinto and BHP, and also has a growing green energy business via the company’s Fortescue Future Industries division. A monster $1.08 per share fully franked dividend was the highlight of Fortescue’s first half of FY24, up 44% on last year’s $0.75 per share interim payout. The
Read MoreColes Group is Australia’s second-largest supermarket chain, whose retail offerings included fresh food, groceries, general merchandise, liquor, fuel and financial services through its store network and online platforms. The value gap between Australia’s two largest supermarket operators has been dramatically closing over the space of a week, following their first-half FY24 results. However, both defensive
Read More