Morgans expects some larger M&A in future-facing metals by BHP Group after moves to divest its entire petroleum portfolio and remove its dual-listed share structure. Costs of the latter are estimated by management to have plummeted by -US$1.2bn to US$400-$500m.
The group has agreed to merge its Petroleum business with Woodside Petroleum ((WPL)), in an all-scrip transaction that ascribes a satisfactory value to BHP Group, according to the analyst. The two companies expect pre-tax synergies topping US$400m per year.
Meanwhile, according to the analyst, the group posted in-line FY21 earnings (EBITDA) on a group earnings margin of 61%, carried by iron ore and to a lesser extent copper. The final dividend was considered ahead of expectations at US$2.
Morgans maintains its Hold rating and edges up its target price to $45.90 from $45.50. The broker expect short-term downward share price pressure once BHP goes ex-dividend. It’s thought is an opportunity for more active investors to consider taking partial profits.
Sector: Materials.
Target price is $45.90.Current Price is $51.33. Difference: ($5.43) – (brackets indicate current price is over target). If BHP meets the Morgans target it will return approximately -12% (excluding dividends, fees and charges – negative figures indicate an expected loss).
