On Friday, Citi resumed coverage on BHP Billiton (NYSE:BBL) Ltd. (BHP:AU) (NYSE: BHP) stock, issuing a Buy rating and setting a price target at AUD48.50. The firm highlighted that BHP has decided not to proceed with a firm offer for Anglo American (JO:AGLJ).
According to Citi, this decision means BHP cannot engage in another attempt to acquire Anglo American for six months, unless there is an intervention by a rival offer.
The initial interest in Anglo American by BHP came at a time when Anglo's shares were trading near a three-year low. Citi noted that Anglo's copper assets presented BHP with the potential to become the world's largest copper producer, suggesting that acquiring these assets could be more cost-effective than investing in new projects, such as the Escondida mine.
Despite BHP not moving forward with the Anglo American deal, the company is expected to focus on internal growth strategies. These include expanding its Chilean copper operations, increasing its iron ore production capacity, and developing the Jansen potash project. However, Citi mentioned that BHP's production growth up to the fiscal year 2030 is projected to be modest.
Citi also pointed out that among Australian diversified mining companies, BHP has the highest earnings leverage to copper prices. The firm believes that the long-term consensus estimates for copper prices are currently too low. Additionally, Citi stated that BHP's shares are trading at attractive multiples for the fiscal year 2025 and are in line with discounted cash flow valuations.
InvestingPro Insights
As BHP Billiton Ltd. (BHP:AU) (NYSE: BHP) pivots away from the Anglo American acquisition and towards internal growth strategies, Citi's optimistic outlook is echoed by certain metrics and InvestingPro Tips. With a strong free cash flow yield, BHP's valuation suggests it's in a robust financial position. This is reinforced by a significant dividend yield of 4.86%, which is particularly attractive to income-focused investors, especially considering BHP has maintained dividend payments for an impressive 45 consecutive years.
InvestingPro Data indicates a market capitalization of $148.65 billion USD and a P/E ratio standing at 15.42 for the last twelve months as of Q2 2024, which may underpin Citi's view of attractive valuation multiples. Additionally, the company's low price volatility could provide a sense of stability for investors in a fluctuating market. While revenue has seen a slight decline of 8.1% in the last twelve months as of Q2 2024, the quarterly growth figures show a positive trend with an increase of 5.67% in Q2 2024, suggesting potential for recovery and growth in the near term.
Investors looking for further insights can find additional InvestingPro Tips for BHP, offering a deeper analysis that could guide investment decisions. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and unlock the full breadth of expert analysis and tips—there are 9 more tips available for BHP at https://www.investing.com/pro/BHP.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.