Stocks’ Details

BHP Billiton Limited

Green Signal for $2.9 Bn Australia Iron Ore Project: Edging up 0.54% on June 15, 2018, BHP Billiton Limited (ASX: BHP) has approved to spend US$ 2.9 Bn on the South Flank Iron Mine Project in the central Pilbara, Western Australia to replace its existing mines. According to the company, it expects production to start in 2021 at the project with ore to be produced for more than 25 years. The objective of this expenditure is to replace depleting mines rather than adding new supply and increase the quality of its iron ore at a time when the high-grade material is selling at a premium. Further, South Flank iron ore will help to increase the company’s average iron grade from 61 per cent to 62 per cent. We expect that this decision will help BHP to compete with its rivals in term of high ore grade as they are in high demand across the market which will support topline growth of the company in future.


South Flank Project – Deposit locations (Source: Company Reports)

On the financial front, the company recorded revenue at $21,779 Mn in 1HFY18 against $18,796 Mn in 1HFY17, marking a growth of 15.9% on a year on year (YoY) basis at the back of product mix growth and pick up in commodity prices. The company had free cash flow of $4.9 Bn in 1HFY18 and will use this cash to further reduce its debt and increase returns to shareholders through higher dividends. Underlying return on Capital Employed was 12.8%, up as compared to 1HFY17 and a further improvement is expected in future. Moreover, the group is on track to deliver productivity gains of $2 Bn by end of 2019 on the back of improved operating and capital productivity, aided by state-of-the-art technology across the value chain. We expect BHP Billiton Ltd to sustain its growth momentum fuelled by increased production and driven by expansion plans. Its sound balance sheet with debt reduction plan and high cash flows and healthy operating margin makes it a valuable stock and ensure returns for the long term. The stock rose up by 40.90 per cent in the last one year and 16.55 per cent in the past three months as at June 14, 2018. The stock is currently trading near its 52-week high level ($ 34.630), hence we maintain our “Hold” recommendation on the stock at the current market price of $ 33.560.
 

Woodside Petroleum Limited

Commenced Train 2 LNG Production:Woodside Petroleum Limited’s (ASX: WPL) stock climbed up 1.631 per cent on June 15, 2018 following the update on Train 2 LNG production which has been started at its onshore facility near Onslow, Western Australia. Further, the management stated that Wheatstone's two trains are important additions to the six trains on the Burrup Hub in WA as these will enable WPL achieve the targeted production of 100MMboe by 2020. Additionally, the company is progressing concept definition for Phase 2 of the Julimar-Brunello Project which will tie-back the Julimar field to the Brunello subsea infrastructure that is connected to the Wheatstone offshore platform and it will support to achieve the Wheatstone's production. Further, the phase for Wheatstone will be dispatching of the domestic gas plant, targeted in the second half of the year, adding to WA's strong and secure energy supply.  Moreover, The Vanguard Group, Inc. became the substantial holder of the Group since 12 June 2018 by holding 47,017,778 securities and 5.022 per cent of the voting power. Meanwhile, the stock was up by 17.16% in the past three months and is trading close to 52-week high level, hence we give a “Hold” recommendation on the stock at the current price of $ 34.270, considering the oil price volatility.

 
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