BHP Group Limited

BHP Details

The Board Urged Shareholders to Vote Against both Resolutions: BHP Group Limited (ASX: BHP) is into minerals exploration, production and processing (particularly coal, iron ore, copper and manganese ore) and hydrocarbon exploration, production and refining. The market capitalization of the company stood at ~A$106.99 billion as on 11th September 2019.

With respect to Resolution 1,the company stated, by ordinary resolution, the shareholders in general meeting may express an opinion, ask for information, or can make a request, about the way in which a power of the company partially or exclusively vested in the directors has been or should be exercised. However, such a resolution must be related to an issue of material relevance to the company or the company’s business and cannot either advocate action which would violate any law or relate to any personal claim or grievance.

And, resolution 2,recommends that BHP suspend memberships of industry associations that undertake lobbying, advertising and/or advocacy relating to climate and/or energy policy, and whose record of advocacy since January 2018 is inconsistent with the goals of the Paris Agreement.

The company has announced a five-year US$400 million Climate Investment Program to develop opportunities to reduce emissions from BHP’s own operations, and those generated from the use of its products.
As per the release, the Board urged shareholders to vote against both of the resolutions.

Financial Highlights: The company reported a profit of US$8.3 billion, which includes an exceptional loss of US$818 million (FY18: US$3.7 billion, which includes a US$5.2 billion exceptional loss). The exceptional loss in FY19 is related to the Samarco dam failure. The company reported profit from operations of US$16.1 billion, which was increased as a result of higher prices, lower depreciation and amortisation charges and the favourable impact of exchange rate movements.

Operational Highlights: The company exceeded the full year production guidance for petroleum and met revised guidance for copper and iron ore. Metallurgical coal and energy coal production were marginally below the company’s guidance predominantly as a result of lower than expected wash plant yields and adverse weather impacts during June 2019 quarter.


Key Metrics (Source: Company Reports)

Final Dividend to be Paid on 25 September 2019: The Board of Directors decided to give a dividend of US 78 cents per share (fully franked) as final dividend. The total ordinary dividends stood at US$1.33 per share for the full-year of 2019. The final dividend will be paid on 25 September 2019.

Stock performance: On the stock’s performance front, it produced returns of 12.47% and 21.41% on YTD basis and one year, respectively. Currently, the stock is trading slightly towards its 52-week high level of $42.330 with PE multiple of 15.89x, and an annual dividend yield of 5.28%. Hence, considering the above-stated facts and current trading levels, we give a “Hold” recommendation on the stock at the current market price of A$36.920 per share (up 1.625% on September 11, 2019).


BHP Daily Technical Chart (Source: Thomson Reuters)
 

Syrah Resources Limited

SYR Details

Update on flake graphite market: Syrah Resources Limited (ASX: SYR) is an Australian-based industrial minerals and technology company which owns and developed the Balama Graphite Project in Mozambique. It has a market capitalisation of ~A$194.29 million as on 11th September 2019. Recently, the companyhas provided an update on the current natural flake graphite market and its planned near-term operational response. As per the release, the company has witnessed a sudden and material decrease in spot natural flake graphite prices in China due to the depreciation of Chinese Yuan and Chinese inventory level concerns. This has impacted the existing contract price re-negotiations and contract renewal discussions, with potential for further weakening of prices into Q4 2019.

Due to decrease in spot graphite prices, the company has taken immediate action to reduce its production volumes in the fourth quarter of 2019 to approximately 5kt per month to maintain operations and continue its production optimisation activities. Besides this, the company will perform an immediate review of further structural cost reduction at the Balama and across the company. Post this, it will also conduct a strategic and operational review for 2020, of which the details will be provided in Q3 2019 quarterly activities update which will be released on 22^nd October 2019.


Graphite Sold and Shipped (kt) (Source: Company’s Reports)

Syrah’s Operational Response: Syrah’s 2019 graphite production strategy and ramp up has been driven by increasing production which is in line with the market demand, unit cost reduction through increased volume and optimisation of carbon grade and product mix for relative pricing benefit. Given the current price indications, the company will maintain production focused on value over volume as well as disciplined cash conservation.

Change of Company Secretary: The company’s Chief Legal Officer and Company Secretary, Jennifer Currie will be on maternity leave and will be replaced by Melanie Leydin for the period.

New CFO Appointed: The company has appointed Stephen Wells as Chief Financial Officer of the company. He is the replacement of David Corr, who was working there since January 2015.

Stock performance: On the stock’s performance front, it produced returns of -32.86% and -40.13% for a period of 5 days and one month, respectively. The stock is currently trading near its 52-week low price of A$0.415. Hence, in view of aforesaid facts and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.535 per share (up 13.83% on September 11, 2019).


SYR Daily Technical Chart (Source: Thomson Reuters)

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