RIO Tinto Limited
RIO Tinto Limited (ASX:RIO) announced on September 28, that it has signed a binding agreement to sell its entire interest in the Grasberg mine in Indonesia to PT Indonesia Asahan Aluminum for $3.5 billion. The transaction is expected to be completed in the first half of 2019, with the receipt of regulatory approvals. Meanwhile, a 4% increase in YTD sales up to 250.7 million tonnes was reported from Pilbara Operations while there was a 5% drop in third quarter sales of 81.9 million tonnes in comparison to the same period of last year. Management estimates negative impact on EBITDA on account of raw material cost of approximately $400 million, and higher thermal coal prices are expected to have a $100 million negative impact in 2018. Meanwhile, the non-binding heads of agreement on Chinalco aiming to acquire Rio Tinto’s entire interest in the Simandou iron ore project in Guinea has lapsed and the companies will work with the Government of Guinea to explore other options for value accretive moves.
Technically, the scrip is on downtrend since September 23, after touching the higher levels of $88.67, Lower lows on the price chart along with trading below the mean deviation of the bollinger bands indicate weakness on the charts. Looking at major indicators like RSI at the levels of 45, and MACD in negative territory, the stock is believed to continue witnessing weakness.
The market cap of RIO was recorded as $30.58bn, and price to earnings ratio (P/E) of 10.16x as on October 29. At current juncture scrip is trading at the price levels of $74.70. Mixed Outlook and dividend payout in line with the management strategy along with current price levels trading at lower zone of bollinger and in oversold territory on technical charts, exhibit “Expensive” scenario at the current levels. We maintain an “Expensive” recommendation on the stock at the current price levels of $74.70.
BHP Billiton Limited
BHP Billiton Limited (ASX:BHP) has five major projects under development in petroleum, copper, iron ore and potash with a budget of US $10.6 billion over the life of the projects as on October 29. Company has all major projects under development well on track.
The company posted free cash flow of US$125 billion for FY-2018, and a 33% increase in underlying profit up to US$8.9 billion was reported for the FY-2018. Recorded Dividend of US 63 cents per share was another highlight. Medium term net debt range remains within US$10-15 billion.
Fundamentally, the group aims to bring its CAPEX below USD $8 bn for FY19 and FY20 with net debt range of USD 10-15 bn in medium term. With regards to price to earnings and book value, the stock looks on a higher side. Technically, the scrip made a high of $35.16 on September 30 and faced a complete bearish move in the month of October till date i.e October 29. Currently, the scrip is trading at the lower end of the Bollinger bands. Major indicators like RSI and MACD indicate some reversal in near term supported with increase in volume.
The market cap of BHP was recorded $100.2bn,with price to earnings ratio (P/E) of 33.13x as on October 29. At current juncture scrip is trading at the price level of $31.65. Healthy financials and dividend payout which has been well in line with the management strategy along with current price levels trading at lower zone of Bollinger bands exhibit a “Hold” scenario at the current price levels of $31.65, up 1.44% on October 29, 2018.
Woodside Petroleum Limited
Woodside Petroleum Limited (ASX:WPL) has recently signed an agreement with China’s privately owned ENN group. Under this agreement, the two groups will jointly investigate the potential opportunities for LNG marketing, trading and shipping which will help WPL in boosting the demand for LNG. The two groups may further explore opportunities in oil and gas exploration, liquefaction and regasification projects and power generation.
WPL came up with its quarterly results on October-18, 2018 for the period ended on September 30, 2018. Quarterly reports posted 25% rise in the revenue levels well supported by rising output at Wheatstone LNG project and higher oil and LNG prices. Revenue jumped from $923 million to $1.16 billion for the quarter ended on September 30. Company reported production levels of 23.1 million barrels of oil equivalent from 20.3 million barrels during the last year placing the company well on track to achieve the annual production between 87 million barrels to 91 million barrels.
Technically, the scrip made a high of $38.97 on September end and faced a complete bearish move with a small pull back around mid of October. The formation of lower lows on the price charts along with trading at the lower end of the Bollinger bands indicate some pull back in near term.
The market cap of WPL was recorded at $31.14bn, with price to earnings ratio (P/E) of 21x as on October 29. At current juncture, scrip is trading at the price levels of $33.93, and healthy financials and rising output at Wheatstone LNG project well in line with the management strategy to achieve the estimated annual production, along with trading levels at lower zone of Bollinger and in oversold territory exhibit “Hold” scenario at the current price levels of $33.93, up 2% on October 29, 2018.
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