BHP Billiton Plc – Value Analysis (LONDON:BLT) : June 13, 2017

Capitalcube gives BHP Billiton Plc a score of 44.

Our analysis is based on comparing BHP Billiton Plc with the following peers – Anglo American plc, Rio Tinto plc, KAZ Minerals PLC, Vedanta Resources plc, Glencore plc, First Quantum Minerals Ltd., Vale SA Pfd A and BHP Billiton Limited Sponsored ADR (AAL-GB, RIO-GB, KAZ-GB, VED-GB, GLEN-GB, 0P6E-GB, XVALP-ES and BHP-DE).

Investment Outlook

BHP Billiton Plc has a fundamental score of 44 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • From a peer analysis angle, relative underperformance over the last year has improved more recently.
  • It trades at a lower Price/Book multiple (0.50) than its peer median (0.72).
  • The market expects BLT-GB to grow at about the same rate as the peers and to maintain the median returns it currently generates.
  • BLT-GB‘s relative asset efficiency and net profit margins are both around the median level.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • Over the last five years, BLT-GB‘s return on assets has declined from above median to about median among its peers, indicating declining relative operating performance.
  • The company’s margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.
  • While BLT-GB‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a P/E ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company’s level of capital investment is relatively low and suggests it is milking the business.
  • BLT-GB might have enough interest coverage to take-on additional debt prudently.

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Leverage & Liquidity

BLT-GB might have enough interest coverage to take-on additional debt.

  • While BLT-GB‘s debt to enterprise ratio of 30.49% is on the high side compared to an overall benchmark of 25% (Note: The peer median is currently 43.12%), it also enjoys a relatively high interest coverage level of 6.33x which may give the company enough financial strength to support additional debt. Thus, the company is classified as having Some Capacity to raise more debt.
  • All 8 peers for the company have an outstanding debt balance.

BLT-GB has moved to a Some Capacity from a relatively high liquidity profile at the prior year-end.

  • BLT-GB‘s interest coverage is its lowest over the last four years and compares to a high of 41.98x in 2012.
  • While its interest coverage decreased to 6.33x from 22.64x (in 2015), its peer median increased during this period to 3.36x from 1.97x.
  • Interest coverage fell 17.69 points relative to peers.
  • BLT-GB‘s debt-EV is its highest over the last four years and compares to a low of 16.17% in 2012.
  • While its debt-EV increased to 30.49% from 23.15% (in 2015), its peer median decreased during this period to 43.12% from 70.69%.
  • Relative to peers, debt-EV rose 34.90 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Anglo American plc 42.97 1.91 4.8 27.44
Rio Tinto plc 20.57 1.61 4.63 44.98
KAZ Minerals PLC 81.36 2.32 1.05 2.45
Vedanta Resources plc N/A 0.89 1.59 7.53
Glencore plc 43.26 1 1.2 17.89
First Quantum Minerals Ltd. 46.44 1.35 0.46 13.49
Vale SA Pfd A 42.75 1.9 3.36 40.93
BHP Billiton Limited Sponsored ADR 46.92 1.79 6.22 39.79
BHP Billiton Plc 30.49 1.79 6.33 40.18
Peer Median 43.12 1.79 3.36 27.44
Best In Class 20.57 2.32 6.33 44.98

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Company Profile

BHP Billiton Plc engages in the exploration, development, production, processing and marketing of minerals, and oil and gas. It operates through the following segments: Petroleum, Copper, Iron Ore, and Coal. The Petroleum segment focuses on exploration, development and production of oil and gas. The Copper segment includes mining of copper, silver, lead, zinc, molybdenum, uranium, and gold. The Iron Ore segment focuses only on mining of iron ore. The Coal segment is the mining of metallurgical coal and thermal (energy) coal. The company was founded on June 29, 2001 and is headquartered in London, the United Kingdom.


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