Four takes on BHP

First, the “buy” from Deutsche:

New strategy and targets should result in significant re-rate

BHP has reported a strong FY17 result with close to record FCF of US$12.6b driving net debt down to US$16.3b. Earnings were below our estimate on higher net interest. A revamped strategy with measurable targets was outlined which we applaud. BHP announced a net debt target of US$10-15b, US$2b in further productivity gains, a capex ceiling of US$8b, and a targeted doubling in group returns by FY22. In addition, the US Onshore will be divested and work on Jansen will stop in CY18. This is a significant shift in strategy and should create significant value for shareholders in our view. We increase our BHP NPV 2% to A$27.73/sh and build in a buyback from FY19E. BUY on valuation.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.