BHP Billiton (BHP) Share Trading Recommendation

Submitted by Craig Strzelecki on 8 February, 2007 - 22:19

BHP Billiton (BHP) have a maintained Buy (1M) share trading recommendation with a $35 share price target from Citigroup Investment Research (CIR). The US$10b increase in the capital management program (BHP Share buyback) to US$11.3b was the highlight of the result and key driver of the day’s 6% share price rally. An Australian off-market buy-back will utilize US$2.5b in 1Q07, with US$8.8b on continuation of the on-market UK buy-back over the next 18 months. The combined buy-back is 4% EPS accretive to our FY08 estimate. The US$6.2b NPAT slightly missed consensus of US$6.3b and CIR’s estimate of US$6.4b, but faded into obscurity against the buy-back. CIR have reduced their FY07 estimate by 1% to US$13.1b and FY08 by 2% to US$13.85b, with allowance for higher costs and now largely constant debt due to buy-back. Interim dividend of US20¢/share was in-line with expectations. Chip Goodyear will retire as CEO before the end of 2007 and CIR expect his replacement to be an internal appointment. Carbon Steel’s Chris Lynch is favored over of Non-Ferrous’s Marius Kloppers as the likely candidate. Costs were up 5% on pcp, but positively the rate of cost increase has now been declining for the last 12 months. The sanctioned & feasibility project pipeline stands at US$17.5b, but is likely to increase with additional approvals and capex pressure on a number of projects. CIR expect the share price to be driven by the looming 2008 production growth from Gulf of Mexico oil and Pilbara iron ore. There is also upside risk to their FY08 estimates from higher aluminium and nickel prices, partially offset by lower copper.

BHP Billiton Limited is listed on the Australian Stock Exchange (ASX) under stock code BHP. You can view their investor website here. BHP was listed on the ASX on 13 August, 1885. Charles "Chip" Goodyear is the CEO of BHP Billiton and Don Argus the Chairman. BHP Billiton was created through the Dual Listed Companies (DLC) merger of BHP Limited (now BHP Billiton Limited) and Billiton Plc (now BHP Billiton Plc), which was concluded on 29 June 2001. BHP Billiton Limited and BHP Billiton Plc continue to exist as separate companies, but operate on a combined basis as BHP Billiton. The headquarters of BHP Billiton Limited, and the global headquarters of the combined BHP Billiton Group, are located in Melbourne, Australia. BHP Billiton Plc is located in London, United Kingdom. The company is principally involved in minerals exploration, production and processing (particularly coal, iron ore, copper and manganese ore) and hydrocarbon exploration, production and refining. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade BHP. Check your charts and good luck with your share trading!

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