[miningmx.com] — BHP Billiton is expected to nearly double its first-half profit to a record, with investors focused on its strategy for its bulging cash pile as iron ore, copper and oil prices soar.
Shareholders have been clamouring for the company to expand its ongoing $4.2bn share buyback, with only a quarter of that completed so far, after it faltered on three major deals over the past three years.
BHP remains undaunted in its takeover ambitions, despite having been forced to ditch its $39bn bid for top global fertiliser maker Potash Corp, an iron ore joint
venture with Rio Tinto and a full takeover of Rio Tinto in the face of government and regulatory resistance.
So BHP may look to preserve cash as it looks to pounce on an oil and gas target, with speculation that it would be interested in Anadarko Petroleum, Apache Petroleum or Woodside Petroleum.
Even with acquisitions and plans to spend $15bn a year on projects, BHP has the capacity to return anywhere between $10bn and $25bn to shareholders through
share buybacks or special dividends, analysts estimate.
On Tuesday, speculation centred around $10bn.
“They’ve got the capacity. It’s whether that’s what they want to do,” said James Bruce, portfolio manager at Perpetual Investments, one of BHP’s top ten Australian shareholders.
BHP is expected to report attributable profit before one-offs of $10.3bn for July to December, based on an average of 14 analysts’ forecasts, up from $5.7bn a year
ago.
That would follow Rio Tinto’s bumper second-half profit of $8.22bn last week and a promise to return $5bn to shareholders over the next two years, starting off with an
on-market buyback of its UK listed shares.
BHP’s shares are considered cheap at the moment, trading on a forward earnings multiple of just 11.9 even after a 9% share price rally to a near 33-month high ahead of the results.
“We think that BHP is attractively priced for investors,” Bruce said.
Australian fund managers looking for an off-market buyback of BHP’s Australian shares are the least likely to get their way, as it makes more sense for BHP to buy back its UK listed shares, which are cheaper, on market.
Analysts expect a dividend of around 49 cents (Australian currency) a share, up from 42 cents a year ago.
Smaller rival Xstrata (XTA.L: Quote) set the pace last week topping forecasts with an 86% jump in full-year profit and a dividend that was nearly double market expectations.
