BHP Billiton Limited

BHP Details

All Major Projects under Development are Tracking Well: BHP Billiton Limited’s (ASX: BHP) stock rose up by 1.026% on May 03, 2018 while the group has recently revealed its operational review for the nine-months’ period ending on 31 March 2018 and disclosed that the full year production will remain unchanged for Petroleum, Metallurgical Coal and Energy Coal segment. Total copper production guidance has been narrowed to between 1,700 kt and 1,785 kt, however guidance for Olympic Dam reduced to approximately 135 kt due to slower than planned ramp-up after the major smelter maintenance campaign. Besides this, Iron Ore production guidance reduced to between 272 and 274 Mt on the back of car dumper reliability issues. The Group copper equivalent production is expected to increase by 6% in the 2018 financial year. Moreover, the exit policy for Onshore US is progressing to plan with bids expected by June 2018 and transactions potentially being announced in the first half of the 2019 financial year. In Petroleum segment, the group has increased footprint in the northern extension of the Wildling prospect in the US Gulf of Mexico through the acquisition of 33.33% interest in the Samurai prospect and further secured an option to purchase an additional 10% interest in the Scarborough development.
 

Operational Performance (Source: Company Reports)
 
The stock rose by 14.08 per cent in the past six months and there is a potential into the business at the back of diversified portfolio and strong fundamentals. Meanwhile, we give a “Hold” recommendation on the stock at the current market price of $ 31.520, considering commodity price scenario.
 

BHP Daily Chart (Source: Thomson Reuters)
 

National Australia Bank Limited

NAB Details

1HFY18 Performance was slightly below expectations but Long-term Growth remains Intact: National Australia Bank Limited’s (ASX: NAB) stock was down by 0.642 per cent on May 03, 2018 after the announcement of first half year performance wherein cash earnings declined by 16.2 per cent to $2,759 Mn in 1HFY18 as compared to prior corresponding period. It was majorly impacted by previously flagged increased investment and restructuring costs occurred during the period. Cash RoE recorded de-growth of 40 bps to 13.6% in 1HFY18 from 14.0% in 1HFY17. Revenue was up by 2.5 per cent and reflected good growth in housing and business lending combined with higher margins during the same period. Net interest margin inclined by 5 basis points (bps), reflecting repricing and lower funding costs, partly offset by the impact of the bank levy and housing lending competition and product mix changes. Expenses rose by 25.3 per cent due to higher expenditure on investment and on personnel costs which included an increase in Enterprise Bargaining Agreement. The Group expects that the expenses will grow by 5 to 8 per cent in FY18 and target to remain broadly flat over FY19-20. 


Revenue Performance (Source: Company Reports)

Moreover, the Group has maintained strong liquidity through the March 2018 half year with a quarterly average Liquidity Coverage Ratio (LCR) of 127%, which is above the APRA requirement of 100%. Further, the group’s Net Stable Funding Ratio (NSFR) stood at 115% as at 31 March 2018 which is above the APRA minimum regulatory requirement of 100% which came into effect from 1 January 2018. APRA expects major Australian banks to achieve Common Equity Tier 1 capital ratios of at least 10.5% by 1 January 2020 based on existing risk-weighted asset (RWA) methodologies. The group expects to achieve APRA’s CET1 ratio benchmark of 10.5% by January 2020 in an orderly manner.  NAB’s leverage ratio came at 5.4 per cent. The group is also selling out of the wealth management sector. Further, the interim dividend for March 2018 half year is 99 cents per share, consistent with the interim dividend for the March 2017 half year. This represents a dividend pay-out ratio of 96.9% for the March 2018 half year on a cash earnings basis. It will be paid on July 05, 2018. Meanwhile, the stock price was up by 4.05 per cent in past one month as on May 02, 2018 and is trading at low levels. We give a “Buy” recommendation on the stock at the current market price of $ 29.390, based on strong fundamentals and consistent dividends.
 

NAB Daily Chart (Source: Thomson Reuters)

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