BHP (BHP:AUD37.30) loses AUD4 billion in MCap, steepest heavyweight fall in All Ordinaries Index 29 July 2020

NEWS BITES - AUSTRALIA

Dateline: Wednesday July 29, 2020

BHP Group Limited (ASX:BHP), Australia's largest Materials company by market cap, has decreased 75.0c (2.0%) from its previous trading session to close at AUD37.30. Compared with the All Ordinaries Index which fell 18.8 points (0.3%) in the day, the relative price change was -1.7%. The volume was 0.9 times the average daily trading volume of 7.4 million shares. It posted the steepest fall in MCap (AUD3.8 billion) with the most influence on the All Ordinaries Index. There were 6,395,609 shares worth AUD238.6 million traded today.

Bullish Turning Points

Price/Earnings of 16.7 close to historical low

The P/E of 16.7 is 0.3 times the highest average P/E of 56.9 in the last five years. This is a value criterion, according to Benjamin Graham who described as a value criterion "A P/E ratio down to less than four-tenth of the highest average P/E ratio the stock attained in the most recent five years".

Dividend Yield increases to 5.7%

Based on dividends of AUD2.12 per share for the trailing twelve months and the last price of AUD37.30 the dividend yield is 5.7%, a significant improvement from 5.6% on the previous day.

BHP Stock Summary (traded in AUD)

Currency1 AUD = 0.72 USD Dividend Yield5.7%
Jul 29 closeAUD37.30SectorMaterials
Ave Daily Volume7,447,932 sharesShares Outstanding5,070,000,000
52-Week Range24.05 - 40.27Market CapAUD189.1 billion [USD135.4 billion]
P/E16.7EPS Growth (FY2019 vs FY2018)130.3%

BHP ADR Summary (traded in USD)

Home ExchangeAustralia% of shares outstanding4.6%
CodeBHPRatio1 ADR equals 2 ordinary shares
ISINUS0886061086TypeSponsored
CUSIP088606108Jul 28 closeUSD53.52
*No. Held by Institutions67,561,933Ave Daily Volume2,589,175 ADRs
Number of shares equivalent135,123,86652-Week Range29.78 - 56.78

*Total ADRs Held by Institutions 67,561,933; equivalent to 135,123,866 BHP Group shares on issue. This represents 4.6% of total shares on issue.

Primary Exchange and Other Listings: Trading Currency and Volume (Excl ADR)

ExchangeTickerCurrencyLastADVTVol % of TotalToday's VI
ASXBHPAUD37.37,447,918100.00.9
FrankfurtBHP1EUR22.711,8370.10.3
Total100.00

1 AUD [Australian Dollar]= 1.6381 EUR

ADVT= Avg. Daily Volume of Trading; VI= Volume Index (1 is avg)

BHP Financials Summary: EPS up 130.3% to USD1.60 in FY2019

+ Net profit was up 124.2% from USD3.7 billion in FY2018 to USD8.3 billion in FY2019.

+ Earnings Per Share (EPS) was up 130.3% from 69.60c in FY2018 to USD1.60 in FY2019.

Year ended JunFY2019FY2018FY2017
Sales (USD B)44.343.136.1
Pretax (USD B)1514.811.1
Net (USD B)8.33.75.9
EPS (USD)1.6030.6961.107

INDEX

SECTION 1 Recent News

SECTION 2 Corporate Profile and Independent Ratings

SECTION 3 Top shareholders

SECTION 4 Today's Bearish Signals

SECTION 5 Ongoing Bearish Parameters

SECTION 6 Today's Bullish Signals

SECTION 7 Ongoing Bullish Parameters

Glossary

LINKS TO FURTHER INFORMATION ON BHP:

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+ Tax & Dividend

+ Financials H1/2019, FY 2019

+ Peer Group Analysis & Ranking

+ News Archives (Aug 2018 - Feb 2020)

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SECTION 1 Recent News

1.1 Changes in Board (TTM)

June 17: BHP will appoint Chief Financial Officer

BHP will appoint David Lamont as Chief Financial Officer. The effective date is Tuesday, December 01.

May 07: BHP Group will appoint Independent Non-Executive Director

BHP Group will appoint Dion Weisler as Independent Non-Executive Director. The effective date is Monday, June 01.

May 07: BHP Group will appoint Independent Non-Executive Director

BHP Group will appoint Xiaqun Clever as Independent Non-Executive Director. The effective date is Thursday, October 01.

1.2 People's News

Wed Jun 17, 2020

BHP will appoint David Lamont as CFO. The appointment takes effect from Dec 01, 2020.

Thu May 07, 2020

BHP Group will appoint Dion Weisler as Independent Non-Executive Director. The appointment takes effect from Jun 01, 2020.

Thu May 07, 2020

BHP Group will appoint Xiaqun Clever as Independent Non-Executive Director. The appointment takes effect from Oct 01, 2020.

1.3 Stock Buzz

News DateHeadlinePublisher
Jul 27, 2020BHP assists RFDS in flying hundreds of COVID-19 patientsSafe To Work
Jul 20, 2020BHP Q4 iron ore output up 7pctAustralian Associated Press
Jul 15, 2020BHP faces $A9b lawsuiteThe bull

SECTION 2 Corporate Profile and Independent Ratings

2.1 Activities

BHP Group Limited (BHP, formerly BHP Billiton Limited) is a diversified natural resources company producing commodities along with substantial interests in oil and gas. BHP's principal business lines are mineral exploration and production as well as petroleum exploration, production and refining. BHP's assets, operations and interests are separated into Petroleum and Potash, Copper, Iron ore, Coal and Nickel.

In FY 2019, the top earner of Revenue was Oil and gas 1 [100%] . In FY 2019, the top regional earner of Revenue was Australia [50.9%] followed by the US [40%] at Rank 2 and Other [9.1%] at Rank 3. In FY 2019, revenue growth was highest in Other [44.9%] followed by Australia [5.4%] at Rank 2 .

2.2 Segment Information

$US$US
Description2019-06-30% of Total2018-06-30% of TotalGrowth(%)
Oil and gas 16.7 B1007.4 B100-9.6
Total6.7 B1007.4 B100-9.6

1 Includes sales to affiliated companies of USD75 million (2018: USD75 million; 2017: USD83 million).

Top Segments by Revenue and rank

In FY 2019, the top earner of Revenue was Oil and gas 1 [100%] .

Regional Information

$US$US
Description2019-06-30% of Total2018-06-30% of TotalGrowth(%)
Australia3.4 B50.93.2 B43.75.4
US2.7 B403.7 B50.7-28.6
Other610 M9.1421 M5.744.9
Total6.7 B1007.4 B100-9.6

Top Revenue Segments by Region and rank

In FY 2019, the top regional earner of Revenue was Australia [50.9%] followed by the US [40%] at Rank 2 and Other [9.1%] at Rank 3.

Top Regional Segments by Revenue growth and rank

In FY 2019, revenue growth was highest in Other [44.9%] followed by Australia [5.4%] at Rank 2 .

2.3 Contact Details

Websitehttp://www.bhpbilliton.com/
Physical AddressLevel 18, 171 Collins Street, MELBOURNE, VIC, AUSTRALIA, 3000
Phone(61) 1300 55 47 57
Fax(61 3) 9609 3015
EmailJames.Agar@bhpbilliton.com

2.4 Industry & Sector

Classification LevelName of Sector
Business SectorMineral Resources
Industry GroupMetals & Mining
IndustrySpecialty Mining & Metals
Economic SectorBasic Materials

2.5 Independent Ratings

+ Top 100 Polluters:

According to environmental non-profit Carbon Disclosure Project (CDP) just 100 companies have been the source of more than 70% of the world's greenhouse gas emissions from 1988 to 2015. The CDP ranked BHP Group Limited 20 [rank 1 is worst] in the top 100 polluters. BHP Group Limited contributed .91% of global industrial greenhouse gas emissions in that period.

+ Fortune 500:

It was ranked 350 by total revenues in the Fortune 500 annual list for 2017; a deterioration over a year from rank 168 in 2016.

+ Top 40 Miners:

It is the largest by MCap among the PwC Top 40 Miners.

+ Industryweek 1000:

It is a new entrant in the Industry Week list of the world's largest 1000 manufacturers by Revenues in 2016, ranked 77.

+ Newsweek 500:

It was ranked 226 by Newsweek and Corporate Knights Capital in the World's 500 Greenest Companies 2016. It had outstanding scores of 7.5% in Waste productivity, 7.3% in Water productivity and 5.2% in Carbon productivity.

+ PwC 100:

It was ranked 54 by MCap as at March 31, 2015 by PwC in the Top 100 Global companies; a deterioration over 6 years from rank 19 as at March 31, 2009.

+ Forbes 2000:

It is the 130th largest by revenue in the Forbes Global 2000.

+ FT 500:

It is the 76th largest by revenue in the FT Global 500.

+ IHS Energy 50:

It was ranked 44 in IHS Energy's list of Top 50 Energy Companies 2013; a deterioration over a year from rank 23 in 2012.

SECTION 3 Top shareholders

DateName of the Share Holder% of Capital
07-04-2020HSBC Custody Nominees (Australia) Limited13.4
07-04-2020J P Morgan Nominees Australia Pty Limited9.8
07-04-2020Citicorp Nominees Pty Ltd2.9
07-04-2020Citicorp Nominees Pty Limited2.9
07-04-2020National Nominees Limited2.0
07-04-2020BNP Paribas Nominees Pty Ltd1.4
07-04-2020Bnp Paribas Noms Pty Ltd0.5
07-04-2020Citicorp Nominees Pty Limited0.5
07-04-2020HSBC Custody Nominees (Australia) Limited0.4
07-04-2020Computershare Nominees Ci Ltd0.3
07-04-2020Australian Foundation Investment Company Limited0.3
07-04-2020Amp Life Limited0.2
07-04-2020HSBC Custody Nominees (Australia) Limited0.2
07-04-2020Argo Investments Limited0.1
07-04-2020HSBC Custody Nominees (Australia) Limited i0.1
07-04-2020HSBC Custody Nominees (Australia) LimitedGsco Eca0.1
07-04-2020Netwealth Investments Limited0.1
07-04-2020Solium Nominees (Australia) Pty Ltd0.1
07-04-2020Milton Corporation Limited0.1
07-04-2020HSBC Custody Nominees (Australia) Limited A/C 20.1

SECTION 4 Today's Bearish Signals

4.1 Rank in the bottom 8% by Price Performance in the Australian market

DescriptionValueRank
% Prem to Vol Wtd Price0.8In Bottom 8%

SECTION 5 Ongoing Bearish Parameters

5.1 Annualised Period-based Total Shareholder Returns [TSR %]: The Worst Period with TSR < 3.9%

TSR %1 yr
BHP.ASX3.8

5.2 Declining Volume, down 31% in 5 years

In the past five years, Average Daily Volume of Trading (ADVT) has decreased 31.2% to 7.4 million shares.

Avg. Daily Volume Traded 12 months ended Jul 29, million shares

YearADVT
20207.4
20197.1
20186.9
20178.4
201610.8

5.3 Satisfies 2 out of 9 criteria of Joseph Piotroski [pass mark 5]:

- Return on Assets improvement [from 6.9% to 9.4%].

- Reduction in total shares on issue.

SECTION 6 Today's Bullish Signals

6.1 Rank in the top 5% by Relative Valuation in the Australian market

DescriptionValueRank
Price/Earnings/Growth0.13In Top 5%

6.2 Uptrend

Price/Moving Average Price of 1.07 and positive MACD:

- The price to 200-day MAP ratio is 1.07, a bullish indicator. In the past 200 days this ratio has exceeded 1.07, 17 times suggesting further upside. The stock is trading above both its MAPs and the 50-day MAP of AUD36.23 is higher than the 200-day MAP of AUD34.96, a bullish indicator. The 200-day MAP has increased to AUD34.96. An increase is another bullish indicator.

- The Moving Average Convergence Divergence (MACD) indicator of 12-day Exponential Moving Average (EMA) of 37.43 minus the 26-day EMA of 36.9 is positive, suggesting a bullish signal.

6.3 Undervaluation

Price/Earnings of 16.7 < sector avg of 32.4:

- Price/Earnings of 16.7 versus sector average of 32.4 and market average of 24.7.

Earnings Yield of 6.0% > Australian ave of 4.1% > Bond Yield of 0.9%:

- Earnings yield of 6.0% is greater than the Australian average earning yield of 4.1%.

- The earnings yield of 6.0% is 6.8 times the 10-year bond yield of 0.9%.

(All figures in %)

Earnings Yield6.0
Australian avg4.1
Dividend Yield5.7
Bond Yield0.9

Dividend Yield > Bond Yield of 0.88%:

The dividend yield of 5.69% is 6.47 times the triple-A bond yield of 0.88%. The times factor of 6.47 is above the benchmark factor of 0.67 times set by Benjamin Graham.

(All figures in %)

Dividend Yield5.69
Bond Yield0.88
Spread4.81

Dividend Yield of 5.7% > Index avg of 4.1%:

- The relative yield of the stock, defined by its yield of 5.7%, divided by average yield of dividend yielding stocks in the All Ordinaries Index of 4.1% is 139.1%. This suggests the stock is undervalued in dividend yield terms.

MCap/Total Assets:

- Tobin's Q Ratio, defined as MCap divided by Total Assets, is 1.3. Compared with the rest of the market the stock is undervalued.

6.4 Other Bullish Signals

- Return on Equity of 18.4% versus sector average of 6.9% and market average of 7.9%.

- Total Liabilities/EBITDA of 3 is less than 5, this compares favourably with the Joseph Piotroski benchmark of 5.

- Return on Assets of 9.4% versus sector average of 3.8% and market average of 1.6%.

- Return on Capital Employed of 18.7% versus sector average of 9.7% and market average of 5.2%.

- Interest cover defined by EBIT/I is 11 times. This indicates it is less leveraged.

- Net profit margin has averaged 19.3% in the last 3 years. This is considered superior and suggests a high margin of safety.

- Economic Value Added defined by Net Operating Profit After Tax of USD7.4 billion less Cost of Capital of USD2.3 billion was AUD5.1 billion. The multiple EVA/Cost of Capital was exemplary at 2.2 times.

- As per the Du Pont analysis, Return on Equity of 18.4% is better than sector average of 6.9%. This is computed as net profit margin of 21.5% times asset turnover [sales/assets] of 0.44 times leverage factor [total assets/shareholders' equity] of 1.9.

SECTION 7 Ongoing Bullish Parameters

7.1 Rank in the top 1% by Size in the Australian market

DescriptionValueRank
MCapUSD135.4 billionIn Top 1%
Annual RevenueUSD44.3 billionIn Top 1%
Ave daily TurnoverAUD238.6 millionIn Top 1%

7.2 Rank in the top 9% by Growth in the Australian market

DescriptionValueRank
EPS Growth %130.3In Top 9%

7.3 Rank in the top 21% by Productivity in the Australian market

DescriptionValueRank
Return on Capital Employed [ROCE] %18.7In Top 20%
Return on Equity [ROE] %18.4In Top 21%

7.4 Annualised Period-based Total Shareholder Returns [TSR %]: The Best Periods with TSR > 8.8%

TSR %3 yrs5 yrs10 yrs20 yrs30 yrs
BHP.ASX29.921.38.914.811.9

7.5 Present Value of AUD1000 Invested in the Past [3 Mo, 1 Yr, 3 Yrs]; The Best Periods with PVAUD1000 > 1,037

PVAUD1,0003 mo ago1 yr ago3 yrs ago
BHP.ASXAUD1,199AUD1,038AUD2,209
Materials sectorAUD1,583AUD1,323AUD1,525
All Ordinaries IndexAUD1,125AUD887AUD1,065

7.6 The Best Periods [3 Mo, 3 Yrs] with Price Change % > 19.8

3-Year price change of 79% for BHP outperformed the change of 6.5% in the All Ordinaries index for a relative price change of 72.6%.

Price Change %Quarter3 Years
BHP19.979
Materials sector58.352.5
All Ordinaries index9.56.5

7.7 Moving Annual Return of 3.3% in the past year:

Moving Annual Return was 3.3% in the past year. Based on a dynamic start date of 5 years ago, the real rate of return has averaged 22.8%. The Moving Annual Return has been positive in 4 of the last 5 years.

BHPClose (AUD)Dividends (AUD)Capital Gain / (Loss) %% YieldAnnual Return %
Jul 2937.32.12(2.3)5.63.3
1 Yr ago38.183.0529.110.339.4
2 Yrs ago29.571.2541.9647.9
3 Yrs ago20.830.730.74.435.1
4 Yrs ago15.941.08(17.4)5.6(11.8)

Close 5 years ago AUD19.31

7.8 Buybacks and 5-Years Decrease of 2.6% in Total Shares on Issue

In the past 5 years total shares on issue have decreased by 141 million (2.6%) from 5.3 billion to 5.2 billion. Buybacks have averaged 23.8 million shares [0.4%] per financial year. Based on a dynamic start date of 5 years ago, there have been declines in issued capital in 2 out of 5 years. A reduction in total shares on issue is a favourable indicator in Joseph Piotroski's 9 indicators.

Year End (Jun 30)Total Shares on IssueFYBuybacksBuyback %
20195,180,000,0002019143,000,0002.7%
20185,323,000,0002018--
20175,323,000,0002017--
20165,322,000,0002016--
20155,318,000,0002015--
20145,321,000,0002014--
Total143,000,000
Average per FY23,833,333

7.9 Created Market Value [CMV] past 14 yrs of AUD54.8 billion

- Market Capitalization has increased by AUD95 billion from AUD94.1 billion to AUD189.1 billion in the last 14 years. This increase comprises cumulative retained earnings (RETE) of AUD40.2 billion and Created Market Value of AUD54.8 billion. The Created Market Value multiple, defined by the change in MCap for every AUD1 of retained earnings is exemplary at AUD2.37.

7.10 P/E/G < 1

The price earnings ratio of 16.7 divided by trailing twelve months eps growth of 130.3% corresponds to an attractive P/E/G of 0.1 times; being less than the value benchmark of 1.0.

EPS Growth (%)130.32
P/E/G0.13
P/E16.66

7.11 Safe Interest Cover and Improving

Interest cover of 11.0 is above a safe benchmark figure of 3. Moreover, it has improved from 10.4 a year ago.

YearsInterest cover
201910.97
201810.41

7.12 Low Debt to Equity (%)

The debt to equity ratio of 48.2% is under a safe benchmark figure of 50%. However, it has deteriorated from 44.4% a year ago.

YearsDebt to Equity (%)
Jun 201948.15
Jun 201844.41
Jun 201747.23
Jun 20168.59
Jun 201548.13

7.13 Increased VWAP, up 121% in 5 years

In the past five years Volume Weighted Average Price (VWAP) has increased by 121.0% to AUD33.89. Based on a dynamic start date of five years ago, there has been no decline in VWAP over the last 5 years.

Past five years, 12 months ended Jul 29 (AUD)

YearHigh PriceVWAPLow Price
202040.2733.8924.05
201939.8131.9126.76
201829.7624.8620.81
201722.5119.3315.24
201620.4215.3311.08

7.14 Increased share turnover, up 46% in 5 years

In the past five years, average daily share turnover has increased 46.0% to AUD246.4 million. This suggests increased liquidity.

Past five years, 12 months ended Jul 29 (AUD million)

YearAverage Daily Turnover
2020246.4
2019228.9
2018172.5
2017163.4
2016168.7

7.15 Increase in Institutional Ownership up from 3.8% to 4.6% (ADRs)

As at March 31, 2020 Institutions held 4.6% of total ADRs on issue; an increase from 4.2% as at December 31, 2019 and 3.8% as at March 31, 2019.

Quarter-endMarch 31, 2019December 31, 2019March 31, 2020
Holdings (%)3.84.24.6

7.16 Satisfies four criteria of Benjamin Graham

- "An earnings-to-price yield of at least twice the triple-A bond"; the stock's earning yield of 6% is 6.8 times the triple-A bond yield of 0.9%.

- The P/E of 16.7 is 0.3 times the highest average P/E of 56.9 in the last five years. This is a value criterion, according to Benjamin Graham who described as a value criterion "A P/E ratio down to less than four-tenth of the highest average P/E ratio the stock attained in the most recent five years".

- "A dividend yield of at least two-thirds the triple-A bond yield"; the stock's dividend yield is 6.4 times the triple-A bond yield of 0.9%.

-"Total debt less than tangible book value"; total debt of USD25 billion is less than tangible book value of USD51.1 billion.-"Earnings growth over the most recent ten years of 7% compounded - that is a doubling of earnings in a five-year period"; the earnings per share have more than doubled in the last 5 years.

Glossary

ADVT: Average Daily Volume of shares Traded

Annual Return: Dividends Paid In a 12-Month Period/Price at the Beginning of the Period + Capital Gain or Loss over 1 Year/Price 1 Year Ago (%)

Capital Gain/Loss from n Years Ago to n-1 Years Ago: Capital Gain or Loss over 1 Year/Price 1 Year Ago (%)

Current Ratio: Current Assets/Current Liabiliites (times)

Debt/Equity: Net Debt/Net Assets %

Dividend Yield: Dividend Per Share/Share Price (%)

EBIT Margin : Earnings Before Interest and Tax/Revenue (%)

Earnings Yield: Earnings Per Share/Share Price (%)

Income during the n years (3/2/1): Dividends received during the Period

Interest Cover: Earnings Before Interest and Tax/Interest (times)

Moving Average Price (n periods): Sum of Prices for each Period/Number of Periods

PCP: Previous Corresponding Period

PV1000: Present value of 1000 invested 1 year/'n' years ago

Price/Earnings: Share Price/Earnings Per Share (times)

Price/NTA: Closing Share Price/Net Tangible Assets Per Share (times)

Price/Sales: Share Price/Sales Per Share (times)

Relative Price Change [RPC]: Relative price change is price change of stock with respect to Benchmark Index

Relative Strength (6 Months): Price close today/Price close 6 months ago, then ranked by percentile within the entire market.

Return on Assets: Net Profit/Total Assets (%)

Return on Equity (Shareholders' Funds): Net Profit/Net Assets (%)

TSR: Total Shareholder Returns is expressed as an annualized rate of return for shareholders after allowing for capital appreciation and dividend

TTM: Trailing 12 Months

Total Liabilities/Total Assets: Total Liabilities/Total Assets

Turnover Rate: value of annual trading volume as a percentage of market capitalisation

Volume Index (VI): Number of shares traded in the period/Average number of shares traded for the period

Volume Weighted Average Price (VWAP): The Volume Weighted Average Price (VWAP) is the summation of turnover divided by total volume in the same period.

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