Via Glynn Lawcock at UBS:
ONE LINER
NPAT miss but higher dividend a positive.
KEY NUMBERS
Underlying EBITDA of US$14,680m (+21% y/y) vs UBSe US$15,361m (Vuma cons US$14,689m).
Underlying NPAT of US$6,036m (+16% y/y) vs UBSe US$6,640m (Vuma cons US$6,331m).
Underlying EPS of US119.4cps (+16% y/y) vs UBSe US131cps (Vuma cons US125cps).DPS of US101.0cps (+55% y/y) vs UBSe US91cps (Vuma cons US84cps).
RESULT HIGHLIGHTS
1. 85% dividend pay-out vs the 3-year historical average of 70% (~100% of FCF).
2. Net debt down 7% y/y to US$11.8bn (pcp US$12.7bn). Target range US$12-17bn.3. Underlying return on capital lifted to 23.6% for the DH (pcp 19.1%).
4. Reported NPAT of US$3.9bn including US$2.2bn exceptional loss for impairments to Energy Coal (US$1.6bn), COVID related costs (US$0.2bn) and Samarco (US$0.4bn).VALUATION
Our A$48.00ps price target (unch.) is set in line with NPV.
GUIDANCE
FY 21 capex guidance lifted to US$7.3bn (prev $7.0bn) on stronger Australian dollar. Unit costs maintained but based on US70c A$. Did flag higher unit costs at QLD Coal due to low volumes. Has lowered Thermal Coal volumes by ~1Mt.
UBS COMMENT
While NPAT was a miss to UBSe and consensus, the higher dividend is positive and dividend forecasts could be lifted if BHP continues to return 100% of FCF.
BHP is my preferred exposure to iron ore right now for the added hedge of oil. Dividends are fine short-term but for miners they never last.
