Stocks’ Details

BHP Billiton Limited (ASX: BHP)

Favorable trading environment: Recently, the 12^th Federal Court in Brazil has approved an additional 66 days for Samarco Mineração S.A. (Samarco), Vale S.A. (Vale), BHP Billiton Brasil Ltda (BHP Brasil) and the Federal Prosecutors to continue discussions on the negotiation of the framework for the settlement of the Public Civil Claims related to the Samarco dam failure. The extension will end on 25 June 2018. Until that time, the interim security arrangements and the current suspension of legal proceedings will remain in place. On the other hand, BHP remained on track to achieve six per cent volume growth for the 2018 financial year. Strong performance in copper was underpinned by the Los Colorados Extension project at Escondida and higher utilisation rates at Pampa Norte. Incremental improvements across its operations from debottlenecking and increased throughput delivered record production in iron ore. The Group’s exit from Onshore US was progressing to plan with bids expected by June 2018. BHP has four major projects under development in Petroleum, Copper and Potash, with a combined budget of US$7.5 billion over the life of the projects.


Petroleum Breakdown (Source: Company Reports)

All projects remain on time and within budget. Total petroleum production for the nine months ended March 2018 decreased by eight per cent to 143 MMboe. Guidance for the 2018 financial year remained unchanged at between 180 and 190 MMboe, comprising Conventional volumes between 119 and 123 MMboe and Onshore US volumes between 61 and 67 MMboe. Minerals exploration expenditure for the nine months ended March 2018 was US$128 million, of which US$92 million was expensed. Escondida copper production for the nine months ended March 2018 increased by 64 per cent to 897 kt, supported by the start-up of the Los Colorados Extension project on 10 September 2017. With favourable oil price, slow but sustainable growth from iron ore scenario, and capability to maintain consistent returns for shareholders, BHP’s stock is expected for a further run. The stock was up by 38.48 per cent in last one year and was up by 10.9 per cent in the past one month. Given the growing economy and commodity price scenario, we maintain a “Hold” recommendation on BHP at the current market price of $32.19.
 

Suncorp Group Limited (ASX: SUN)

Strong focus on Growth:The group released itsquarterly update as at 31 March 2018, and indicated that total lending grew 0.9% over the quarter, representing a moderation in growth compared to the first half of the financial year and contributing to financial year-to-date growth of 5.4%. The result reflects its commitment to responsible and sustainable lending practices, as well as its focus on enhancing customer experience to drive growth. Moderate growth in the home lending portfolio of $361 million or 0.8% for the quarter, was achieved through its consistent price and service offerings. Credit quality remains strong with impairment losses for the quarter of $2 million, or 1 basis point of gross loans and advances (annualised), which is well below the through-the-cycle operating range of 10 to 20 basis points.


Lending Portfolio (Source: Company Reports)

Following the payment of the 2018 financial year interim dividend, Suncorp Group’s Common Equity Tier 1 ratio of 8.80% reflects a sound capital position within the operating range of 8.5% to 9.0%.Subsequent to the end of the March quarter, Suncorp announced a $1.25 billion Residential Mortgage-backed Security (RMBS) transaction, increasing CET1 by approximately 13 basis points. Suncorp remains committed to maintaining confidence and stability in the Australian banking system and supports measures that deliver improved outcomes for customers. Suncorp expects lending growth to remain above system growth for the 2018 financial year, albeit moderating from the 1.75x system growth in housing lending as reported in the first half. Suncorp is well placed to accommodate industry-wide prudential changes related to APRA’s implementation of Unquestionably Strong capital and Basel III revisions. The stock price was up by 1.6 per cent in the past six months and by 5.28% in the past one month. We recommend to “Hold” the stock at the current market price of $14.05.
 

Woodside Petroleum Limited (ASX:WPL)

Undertaking innovative ways for supply of natural gas: The Company continued to perform to plan diverse activities across its portfolio. Pluto achieved a number of production records following completion of a cold high-rate trial designed to inform its decision-making on expansion options for Pluto LNG. Wheatstone has made significant progress with commissioning of LNG Train 1 in the final stages. The North West Shelf Project participants achieved a major milestone by proposing non-binding key terms to process gas through the Karratha Gas Plant to other resource owners. The participants are now negotiating with the resource owners and targeting preliminary agreements in early 2018.


Exploration at offshore Myanmar (Source: Company Reports)

The Persephone project will be delivered six months ahead of schedule and 30% under budget.The Group finalised a significant LNG sale and purchase agreement with Pertamina, which will see Woodside become a major supplier of LNG to Indonesia. Woodside is actively progressing an exploration and appraisal campaign in support of development planning activities. Woodside Singapore has committed to supply initial ramp up quantities building up to approximately 0.6 million tonnes per annum from 2022 to 2034 and has the option to increase the supply to approximately 1.1 million tonnes per annum from 2024 to 2038. LNG to be supplied to Pertamina under the SPA will be sourced from Woodside’s global portfolio. Recently, the Company entered into a non-binding memorandum of understanding (MOU) with Perdaman Chemicals and Fertilisers Pty Ltd for the supply of natural gas. In the last one month, the price was up by 7 per cent and further edged up by 1.2 per cent on 9 May 2018. We recommend to “Hold” the stock at the current market price of $32.35.

 
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