BHP Group Limited

 
Robust operations: BHP Group Limited (ASX: BHP) happens to be in the business of the extraction and processing of minerals and oil & gas. It is a leading resource company with a global reach.  Recently, the company has provided an operational review for the half year ended 31 December 2018 and disclosed about the appointment of the new company secretary. As per the release, the company provided production guidance for copper between 1,645 kt and 1,740 kt for FY 2019. On 17 December 2018, the company did an off-market buyback of US$5.2 billion. In the petroleum segment, a significant achievement is the first appraisal well in Mexico encountered oil.

During the December 2018 quarter, the company achieved its first production in the North West Shelf Greater Western Flank-B project. The company had 5 major projects which are under development at the end of 2018, which are having a total budget of US$10.6 billion over the life of the projects.

 

KPI’s (Source: Company Report)

In FY2018, higher prices and a robust operating performance generated strong cash flows, helping the company to reduce net debt and increase dividends. On the financial front, the company reported US$43,638 million net revenues in FY18 compared to restated numbers of $36,135 million in FY17, up by 20.8% Y-O-Y primarily driven by global materials demand from China. Thenet income after tax from continuing operations stood at US$7,744 million in FY18 compared to US$6,694 million in FY17, up by 16.0% approximately, driven by higher operating and investment & interest income. The current ratio increased significantly by 35.6% and stood at 2.51x in FY 18 compared to 1.85x in FY17, mainly on the improvement of current assets primarily from assets held for sale.

What to Expect From BHP:Moving forward, the companyhas a two-year budget, a five-year plan and a longer-term life-of-asset plan, with a positive outlook in the short-term despite volatile commodity prices. Moreover, it focuses on a strategy of owning and operating large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market. The stock of BHP, however, is trading at a PE multiple of 37.170x with a YTD return of 8.38%.

On the back of quarterly operational developments coupled with strong financial performance, we maintain our “Hold” recommendation on the stock at the current market price of $35.00 per share.

CSL Limited

Constant revenue growth & robust fundamentals: CSL Limited (ASX: CSL) is under the health care segment, and the company is engaged into development, research, manufacturing, and marketing of cell culture media, human plasma fractions, and pharmaceutical and diagnostic products. Recently, the group has presented its business prospects at the JP Morgan Healthcare conferenceand highlighted about business objective for the future. It was presented by Mr. Paul Perreault – the Managing Director and CEO. According to the presentation,the management discussed its strong market position with around $8.0 billion revenues in more than 60 countries.It has a heavy R&D pipeline which can fuel future growth with a strong financial position.The strategic partnership between CSL and Vitaeris will support an emerging transplant portfolio.


Operating Performance (Source: Company Report)

The operating revenue has a CAGR growth of 9.51% approximately, and a consistent increase over the past five years on a reported basis. Its FY2018 sales revenue stood at $7,588 million an increase by 14.69% Y-O-Y basis as compared to $6,615.8 million in FY 2017 driven by improving core operations.The net income stood at $1,728.9 million for FY 2018 compared to $1,337.4 million in FY 2017 an increase of 29.3% driven by improved sales. The operating profit margin improved by 4.4% Y-O-Y and stood at 28.8% in FY18 on the back of improved revenues.

What to Expect from CSL Moving Forward: Going forward, the company has a strategy to develop & deliver innovative medicines that saves life, protects public health and help people with life-threatening medical conditions.

Meanwhile,the stock has generated a positive YTD return of 4.89% and is currently trading slightly towards a 52-week high level with PE multiple of 37.60x. In the near term, there might be some price correction in the stock. We, therefore, recommend “Expensive” recommendation on the stock at the current market price of $193.770, suggesting that the investor should wait for a few more trading sessions to get the better entry level.

 Macquarie Group Limited

Strong Q-o-Q results: Macquarie Group Limited (ASX: MQG) is a diversified financial group with a different line of services including asset management and finance, banking, advisory & risk, and capital solutions across debt equity and commodities.

Consolidated Income Statement (Source: Company Report)

The profit attributable to equity-holders for the group stood at A$1,310 million for the half-year ended 30 September 2018, up by 5% from the prior corresponding period primarily driven by the capital market facing business which delivered a net profit of A$1,106 million up by 95% and commodities and capital business which are up by 85.0% and 114.0% pcp, respectively.However, to some extent, it was off-set by the asset management business which is down by 36% period on period. The net operating income increased by 8% for the half year ended which stood at $A5,830 million as compared to A$5,397 million in the prior corresponding period driven by higher net interest and trading income, higher fee & commission income coupled with lower credit and other impairment charges.

What to Expect from MQG Moving Forward: Going forward, the company expects the FY19 results to be up by around 10.0% from the previous year. It is better placed to deliver superior performance going forward in the short-medium term driven by its deep expertise in major markets, strength in diversity and its ability to adapt its portfolio mix to changing market conditions, along with conservative balance sheet and efficient risk management.

The stock is however currently trading at $116.700 with a PE multiple of 15.0x. It has generated returns of 8.95% over the past one month but slightly underperformed over the period of last six months with a negative return of 4.76%. However, the P/BV multiple of the company is trading at 2.4x which is significantly higher than the industry median of 1.1x which represents overvalued at the current juncture.Considering the decent performance in 1H FY19 and stock price trading  slightly towards 52-week higher level, we have a wait and watch view on the stock at the current market price of $116.70 (up 0.249% on February 04, 2019), as investors are punting in the stock given the company’s future prospects. 

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