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  1. #61
    Member FarmerGeorge's Avatar
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    Corporate it is worth looking into the numbers for both RIO and BHP.

    I usually steer clear of anything with a market cap over about 1.5bn - but in this case I think there is significant value in both these big names.

    Take a look at their resource mixes and just how far spot prices (and long term growth rates) need to fall to get the companies back to something 'normal' like perhaps a 13x Fwd P/E.

    Why are they trading so low? No way of knowing of course but I suspect it's the European debt woes, coupled with a very high AUD.

    May go without saying but I'm a holder and have been buying over the past month or two. Very keen to hear alternative views on this but I believe they're both very undervalued, like, ridiculously so.
    Felix, qui potest rerum cognoscere causas

  2. #62
    Legend shasta's Avatar
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    Quote Originally Posted by FarmerGeorge View Post
    Corporate it is worth looking into the numbers for both RIO and BHP.

    I usually steer clear of anything with a market cap over about 1.5bn - but in this case I think there is significant value in both these big names.

    Take a look at their resource mixes and just how far spot prices (and long term growth rates) need to fall to get the companies back to something 'normal' like perhaps a 13x Fwd P/E.

    Why are they trading so low? No way of knowing of course but I suspect it's the European debt woes, coupled with a very high AUD.

    May go without saying but I'm a holder and have been buying over the past month or two. Very keen to hear alternative views on this but I believe they're both very undervalued, like, ridiculously so.
    Both BHP & RIO have reduced debt, & initiated multi billion dollar share buybacks, suggesting they dont have an immediate need to search for bolt on acquitions.

    The Aussie market has some issues ie, AUD/USD, has the resource sector had its run?, project cost blow outs (every few days we hear another story) & the carbon tax uncertainty to contend with, this could delay or stop projects being developed in Australia.

    BHP is looking for more Oil & Gas exposure having added to its Potash assets, & RIO are looking to expand there Pilbara Iron Ore projects, so they are still moving ahead, but growth might be slowing down, & will do if the global economy/EU & US debt issues continue to affect credit/credit ratings.

    To gain exposure to both BHP & RIO, + global competitors Vale, Xtrata, Glencore etc, have a look at ASX listed GMI - a resource listed investment company, i started a thread ages ago - Might be worth comparing BHP & RIO & there P/E ratios to there global competitors?

  3. #63
    Corporate
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    Guys, thanks for your replies. I also think that direct broking may not have the number of shares on issue quite right. Doesn't BHP have a dual listing in the US which would potentially double the market cap of $144billion that I was working with?

  4. #64
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    I find BHP to be a difficult beast to get a proper handle on, largely because of its - BHP Billiton, that is - status as a Dual Listed Company. BHP primarily listed in Aust and Billiton in UK. The two companies operate separately but the total group is run as one enterprise, whatever that means when you get down to the details.

    As at last balance date, the Market Cap of the BHP Billiton group was quoted as USD165b approx so I would think that the $144b number ($139.5b according to The Age) would apply to the total BHP Billiton group.

    Despite the complexities of the BHP Billiton group I hold and regard it as one of the cornerstones of my long term Aussie portfolio.
    Last edited by macduffy; 13-07-2011 at 08:16 AM.

  5. #65
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    Quote Originally Posted by macduffy View Post

    Despite the complexities of the BHP Billiton group I hold and regard it as one of the cornerstones of my long term Aussie portfolio.
    As do I, and I bought a few more recently.

    TBH doing your own research on large caps is pointless. There are dozens of well qualified analysts that study the company full time. Almost all have a buy recommendation on both BHP & RIO and both are quite cheap on a forward PE.

    The rationale is:
    1 - this resources boom is going to play out for a while with China India, so resources is a good place to invest in the long term
    2 - the diversified majors have advantages over the juniors and are 10x less risky
    3 - in the event of a downturn the majors will do better
    4 - i don't possess the geological understanding to invest in the smaller resources

    I don't hold RIO because I prefer BHP's more diversified asset mix and better governance record. RIO is very dependent on Iron ore.

  6. #66
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    ...I do find it interesting as to why there is so little discussion re this "beast"...in the past 4-5 months the SP has fallen some 27%...it pays 2.5 div...PE 10.2...as the above posts indicate BHP does have its attractions I would have thought...esp...at $36...last week...

    I think I read last week that by 2020 there will be 30 cities bigger than Sydney...in China...mmmmm
    Last edited by troyvdh; 17-08-2011 at 04:19 PM. Reason: because

  7. #67
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    Yes, BHP is a sleeping giant!

    I hold a few and often have intentions of buying more "on the dips". But like most posters here, I guess the percentage gain from a well chosen smaller company seems to offer more appeal.

    I expect a bumper result when they report next week but likely as not the market will yawn and mark them down a bit! A chance to buy on the dip?

  8. #68
    Corporate
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    BHP now at $34.5

    I'm still trying to get a handle on the total market capitalisation. From the latest annual report I make total share on issue about 5.2 billion, which at $34.5 is a market capitalisation of $180 billion.

    I make the historic PE a crazy 7.5 (180b/24b).

    Can anyone cast there eye over this?

    Cheers,
    C
    Last edited by Corporate; 24-09-2011 at 01:17 PM. Reason: wrong NPAT

  9. #69
    Senior Member Toulouse - Luzern's Avatar
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    Hi Corporate
    Here is my take (E&OE).
    I hope it is useful.

    Your calculation is in the ball park. Depends on source and timing of data.
    Last years published result was exceptional, top and especially bottom line.

    From the detailed tab on BHP at DB site.
    My assumption is these are updated daily.

    Total Issue: 3,211,496,105
    Market Capitalisation: $110,957,190,428 (@3455)

    Earnings/Share: 399.57 cents
    Price/Earnings Ratio: 8.65
    NTA per share 990 cents
    From BHP annual report:
    http://www.bhpbilliton.com/home/inve...nteractive.pdf

    June 2110 Capitalisation $160 billion approx and June 2011 $233.9 billion.

    PE Calculation is often based on average capitalisation for the year (160+233.9 / 2)

    Reuters tab on DB site shows PE as 8.93.

    BHP has been doing share buy backs and cancellations ( I think) and this impacts shares on issue.

    So the PE is certainly less than 10 based on all of the above and your own analysis.

    For the ASX competition run by Jenny I wanted either BHP or RIO in Dec 2010.
    I chose RIO from my analysis at the time as the best performer recently.
    RIO is down 27% approx in the competition.

    If you look at 2 year super charts on DB comparing BHP, RIO and ASX200 you will see in the two years RIO peaked at + 45% (approx) in Feb/Apr in 2011, BHP peaked at plus 29% in April, ASX200 peaked at + 5% in May 2010 and April 2011.

    RIO is for the two years now + 2%, BHP - 10% and ASX is -17%.

    With current environment while BHP may look a buy the market seems unconvinced over recent months ...

    However if you look at the candles over two years BHP is now at a two year plus low...

    Is this the moment? <>
    Last edited by Toulouse - Luzern; 24-09-2011 at 02:23 PM. Reason: correct typos

  10. #70
    Corporate
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    Quote Originally Posted by Toulouse - Luzern View Post
    Hi Corporate
    Here is my take (E&OE).
    I hope it is useful.

    Your calculation is in the ball park. Depends on source and timing of data.
    Last years published result was exceptional, top and especially bottom line.

    From the detailed tab on BHP at DB site.
    My assumption is these are updated daily.

    Total Issue: 3,211,496,105
    Market Capitalisation: $110,957,190,428 (@3455)

    Earnings/Share: 399.57 cents
    Price/Earnings Ratio: 8.65
    NTA per share 990 cents
    From BHP annual report:
    http://www.bhpbilliton.com/home/inve...nteractive.pdf

    June 2110 Capitalisation $160 billion approx and June 2011 $233.9 billion.

    PE Calculation is often based on average capitalisation for the year (160+233.9 / 2)

    Reuters tab on DB site shows PE as 8.93.

    BHP has been doing share buy backs and cancellations ( I think) and this impacts shares on issue.

    So the PE is certainly less than 10 based on all of the above and your own analysis.

    For the ASX competition run by Jenny I wanted either BHP or RIO in Dec 2010.
    I chose RIO from my analysis at the time as the best performer recently.
    RIO is down 27% approx in the competion.

    If you look at 2 year super charts on DB comparing BHP, RIO and ASX200 you will see in the two years RIO peaked at + 45% (approx) in Feb/Apr in 2011, BHP peaked at plus 29% in April, ASX200 peaked at + 5% in May 2010 and April 2011.

    RIO is for the two years now + 2%, BHP - 10% and ASX is -17%.

    With current environment while BHP may look a buy the market seems unconvinced over recent months ...

    However if you look at the candles over two years BHP is now at a two year plus low...

    Is this the moment? <>
    Thanks for your reply. I think the shares on issue is actually more like 5.2 billion, not 3.2 billion. The 3.2 billion are only those listed on the ASX.

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