13 November, 2019 (16:00:00 AEST)

BHP Group drops on high volatility


BHP Group Limited (ASX:BHP), Australia's largest Materials company by market cap, traded between an intraday low of $A36.59 and a high of $A37.03, suggesting a trading opportunity between peaks and troughs. The average daily volatility of 1.3% places BHP Group's stock in the 4th quartile in the market, meaning it is the least volatile. Since the start of trading its volatility (highest price minus lowest price/lowest price) of 1.2% was 0.9 times the average daily volatility of 1.3%, up from 1.2% on Tuesday and 0.5% on Monday. BHP Group's stock price has decreased 31.0c (0.8%) from its previous trading session to close at $A36.79. Compared with the All Ordinaries Index which fell 51.5 points (0.8%) in the day, the relative price change was -0.1%. There were 5,847,833 shares worth $A215.1 million traded today. The volume was 0.8 times the average daily trading volume of 7 million shares.

BULLISH TURNING POINT

Price/Earnings
The P/E of 15.8 is 0.3 times the highest average P/E of 56.9 in the last five years. This is a value criterion, according to Benjamin Graham who described as a value criterion "A P/E ratio down to less than four-tenth of the highest average P/E ratio the stock attained in the most recent five years".

Stock Summary
CurrencyAustralian Dollar (AUD) 1 AUD = 0.69 USD
Today's close (AUD)36.79
52-Week Range (AUD)27.6-41.0
SectorMaterials sector
Shares Outstanding5,180,000,000
Market Cap$A190.6 billion ($US130.6 billion)

Highlights in today's Report:

SECTION 1 SENSITIVITY TO ZINC PRICE

SECTION 2 TODAY'S AGGREGATE VOLUMES AND PRICES

SECTION 3 TODAY'S BEARISH SIGNALS

SECTION 4 TODAY'S BULLISH SIGNALS

SECTION 5 RELATED NEWS

RECAP FROM PREVIOUS REPORTS (UPDATED AT THE LAST PRICE OF $A36.79):

SECTION 6 THE PAST WEEK

SECTION 7 ONGOING BULLISH PARAMETERS

SECTION 8 ONGOING BEARISH PARAMETERS

SECTION 9 SUMMARY FINANCIALS

SECTION 10 CORPORATE PROFILE

SECTION 1 SENSITIVITY TO ZINC PRICE

Zinc increases
Tuesday November 12, 2019
Zinc (LME:ZS) has increased $US4.50 (or 0.2%) from its last trading session of November 11, 2019 to close at $US2,542.50 per tonne.

PV$10001-week1-month1-year
ZS.LME9801,045983

Global Rank out of 88 commodities
The present value of $1,000 invested a year ago is $1,410, ranking it 5 out of 88 commodities. Its 6-month relative strength (or price percentile rank) is 78.
DescriptionValueRankQuartile
Rel Strength 6 Mo (US$)7819Top
PV$1000 (1Year) US$1,4105Top

SECTION 2 TODAY'S AGGREGATE VOLUMES AND PRICES

[Volume Index or VI in brackets; 1 is average]
+ ASX: BHP.ASX 5,847,833 [VI of 0.8] volume 89.96% of aggregate. Price: $A36.79.
+ OTCBB: BHPLF.OTCBB 640,000 [VI of 1.1] volume 9.85% of aggregate. Price: $US25.13. Using the current exchange rate of USD1 equals 1.4591AUD, The shares are at a 0.3% discount to the close price on ASX.
+ Frankfurt: BHP1.FRA 12,690 [VI of 2.1] volume 0.2% of aggregate. Price: EUR22.60. Using the current exchange rate of EUR1 equals 1.6106AUD, The shares are at a 1.1% discount to the close price on ASX.
+ Aggregate volume: there were 6.5 million shares of BHP Group worth $A239.1 million traded today. The aggregate volume was 0.9 times average trading of 7.6 million shares.

SECTION 3 BHP GROUP BEARISH SIGNALS

3.1 Overvaluation [compared with sector average]:
Price/Earnings
+ Price/Earnings of 15.8 [9.9].
Price to Sales
+ Price/Sales of 3 [1.8].
Price to Book
+ Price to Book of 2.5 [1.8].
Price to EBITDA
+ Price to EBITDA of 7.9 [6.8].

3.2 Short Selling:
+ In the Australian Short Selling market of 866 stocks, short selling (on ASX and CHI-X) as a % of issued shares ranked 154th and within the top quartile of stocks, a bearish indicator.

3.3 Downtrend:
Price/Moving Average Price:
+ The Price/MAP of 1.0 for BHP is lower than the Price/MAP for the All Ordinaries Index of 1.06.
+ The price to 200-day MAP ratio is 1.0. In the past 200 days this ratio has been under 1.0, 27 times suggesting downside. The 50-day MAP of $A36.42 is lower than the 200-day MAP of $A36.78, another bearish indicator.
Past Week:
+ BHP Group Limited is placed 886/1377 in BuySellSignals' ranking of Australian performers in the past week, a percentile ranking of 36.
+ In the past week, volume was 0.8 times average and the shares were down 1.9%. Wednesday's close price is at a 0.9% discount to its 5-day Volume Weighted Average Price (VWAP) of $A37.14.
Relative Strength (6 months):
+ In the Australian market of 1,375 stocks and 25 units traded today, the stock has a 6-month relative strength of 48 which means it has underperformed 52.0% of the market.

3.4 Low Price Performance Indicator and rank of BHP Group in the Australian market:
DescriptionBHP ValueRank In Market
% Prem to Vol Wtd Price1.5In Bottom Quartile

Overbought/Bearish Signals:
+ The Stochastic indicator of 82.7 has broken through the overbought line of 80; this indicates the price is close to its 14-day high and is likely to revert to a downtrend.

SECTION 4 BHP GROUP BULLISH SIGNALS

4.1 Undervaluation [compared with sector average]:
Earnings Yield
+ Earnings yield of 6.3% is 5.0 times the 10-year bond yield of 1.28%.
Price/Earnings/Growth
+ Price/Earnings/Growth of 0.1.
+ The price earnings ratio of 15.8 divided by annual growth in EPS (FY2019 vs FY2018) of 128.6% corresponds to an attractive P/E/G of 0.1 times ; being less than the value benchmark of 1.0.
Dividend Yield
+ To quote Benjamin Graham: "A dividend yield of at least two-thirds the triple-A bond yield"; the stock's dividend yield is 7.1 times the triple-A bond yield of 1.3%.
+ The relative yield of BHP, defined by its yield of 9.1%, divided by average yield of dividend yielding stocks in the All Ordinaries Index of 4.9% is 185.9%. This suggests BHP Group stock is undervalued in dividend yield terms.
MCap/Total Assets
+ Tobin's Q Ratio, defined as MCap divided by Total Assets, is 1.3. Compared with the rest of the market the stock is undervalued.

4.2 Undervaluation Indicators and rank of BHP Group in the Australian market:
DescriptionValueRank In Market
Price/Earnings/Growth0.1In Top 5%
Dividend Yield %9.1In Top 7%

4.3 Uptrend:
Price/Moving Average Price and MACD:
+ The Moving Average Convergence Divergence (MACD) indicator of 12-day Exponential Moving Average (EMA) of 36.76 minus the 26-day EMA of 36.45 is positive suggesting a bullish signal. Both the 12-day EMA as well as the 26-day EMA are rising, another bullish signal.
+ The price to 50-day EMAP ratio is 1.0, a bullish indicator. In the past 50 days this ratio has exceeded 1.0, 13 times suggesting further upside. The 50-day EMAP has increased to $A36.40. An increase is another bullish indicator.

4.4 High Price Performance Indicators and rank of BHP Group in the Australian market:
DescriptionBHP ValueRank In Market
Today's Trading Turnover$A215.1 millionIn Top 1%
MCap$A190.6 billionIn Top 1%
Volatility %1.2In Top Quartile

SECTION 5 BHP GROUP RELATED NEWS

American Depository Receipts

+ BHP Group ADR falls for a third consecutive day, a three-day fall of 2.2%
BHP Group Limited (N:BHP), the International Depository Receipt (IDR) market's largest Mining company by market cap, has fallen 5.0c (0.1%) for a third consecutive day on Tuesday. This brought its three-day fall to $US1.15 (2.2%), compared with the Bank of New York Mellon Composite ADR Index which fell 0.7 points (0.5%) in the three days for a relative price change of -1.8%. Cumulative volume in the 3 days was 0.8 times the average 3-day volume of 2.1 million ADRs. The ADR last traded at $US50.32. There were 1,774,700 ADRs worth $US89.3 million traded today.

RECAP FROM PREVIOUS REPORTS (UPDATED AT THE LAST PRICE OF $A36.79):

SECTION 6 THE PAST WEEK

6.1 Snapshot: BHP Group stock was down 71.0c or 1.9% in the past week. Volume in the week was 0.8 times average trading of 34.9 million shares. It outperformed the All Ordinaries index in 3 out of 5 days.
DayBHP GroupClose price [AUD]Price change %Relative change %Comment
TuesdayFalls for a fourth consecutive day, a four-day fall of 1.1%37.1-0.20.1Falls for a fourth consecutive day
MondayDecreases37.18-0.3-1.0Overbought: close to 14-day high
FridayFalls for a second consecutive day, a two-day fall of 0.5%37.3-0.10.02Overbought: close to 14-day high
ThursdayFalls 0.7% from 14-day high37.35-0.4-1.3Steepest Fall
WednesdayAdds $A2.8 billion in MCap, top heavyweight rise in All Ordinaries Index37.51.52.0Top Rise

6.2 Volatility:
+ BHP Group is at a discount of 10.2% to its 12-month high of $A40.99 on July 03. It is also at a premium of 33.5% to the 12-month low of $A27.56 on November 28, 2018.

SECTION 7 ONGOING BULLISH PARAMETERS

7.1 Performance:
+ Return on Equity 18.4% [15.6%].
+ Return on Assets 9.4% [8.6%].
+ Return on Capital Employed 18.7% [15.6%].
+ Net profit margin has averaged 19.3% in the last 3 years. This is considered superior and suggests a high margin of safety.
+ As per the Du Pont analysis, Return on Equity [ROE] of 18.4% is better than sector average of 15.6%. ROE is computed as net profit margin of 21.5% times asset turnover [sales/assets] of 0.44 times leverage factor [total assets/shareholders' equity] of 1.9.

7.2 Growth:
+ Year-on-Year Earnings Growth of 128.6%.

7.3 Low Debt Indicators:
+ The debt to equity ratio of 48.2% is under a safe benchmark figure of 50%. However, it has deteriorated from 44.4% a year ago.
+ Interest cover defined by EBIT/I is 11 times. This indicates it is less leveraged.
+ Total Liabilities/EBITDA of 3 is comfortably below the Joseph Piotroski benchmark of 5.

7.4 High Growth and Performance Indicators and rank of BHP Group in the Australian market:
DescriptionValueRank In Market
EPS Growth %128.6In Top 7%
Return on Equity [ROE] %18.4In Top Quartile


7.5 Moving Annual Return (Past 5 years)
Based on a dynamic start date of 5 years ago, the real rate of return has averaged 17%. The Moving Annual Return has been positive in 4 of the last 5 years. An investment a year ago in BHP would have produced a return of 34.4%.
BHPClose (AUD)Dividends (AUD)Capital Gain / (Loss) %% YieldAnnual Return %
Nov 1336.793.3423.211.234.4
1 Yr ago29.871.5623.26.429.6
2 Yrs ago24.251.0617.25.122.4
3 Yrs ago20.680.4123.62.426.1
4 Yrs ago16.731.67(34.1)6.6(27.5)

Close 5 years ago $A25.37

7.6 Increased VWAP
Past five years, 12 months ended Nov 13 (AUD)
YearHigh PriceVWAPLow Price
201940.9934.5927.56
201832.4427.7923.26
201724.8921.3118.68
201620.7815.3611.41
201526.1921.4916.08
In the past five years Volume Weighted Average Price (VWAP) has increased by 60.9% to $US34.59. Based on a dynamic start date of five years ago, there have been declines in VWAP in 2 out of 5 years.

7.7 Increased Average Daily Turnover
Past five years, 12 months ended Nov 13 (AUD million)
YearAverage Daily Turnover
2019241.6
2018189.0
2017172.9
2016162.8
2015164.5
In the past five years, average daily share turnover has increased 46.8% to $US241.6 million. This suggests increased liquidity.

7.8 Increase in Institutional Ownership (ADRs)
Quarter-endMarch 31, 2019June 30, 2019
Holdings (%)3.84.0
As at June 30, 2019 Institutions held 4.0% of total ADRs on issue; an increase from 3.8% as at March 31, 2019.

7.9 Turnover Rate & Turnover Period:
+ The turnover rate in the 12 months to date was 33.5% (or a turnover period of 2 years 11 months). The average length of ownership of the stock is 1.8 times the average holding period of 1 year 8 months for stocks in the All Ordinaries Index suggests a larger number of core investors, making a long-term investment safer.

SECTION 8 ONGOING BEARISH PARAMETERS

8.1 Declining ADVT past five years
Avg. Daily Volume Traded 12 months ended Nov 13, million shares
YearADVT
20197.0
20186.7
20178.0
201610.5
20157.5
In the past five years, Average Daily Volume of Trading (ADVT) has decreased 7.3% to 7 million shares.

SECTION 9 BHP GROUP SUMMARY FINANCIALS

9.1 Dividend History
Trailing 12 months dividend for the 12 months ended November 13 has improved from $US1.67 in 2015 to $US3.34 in 2019; there were 1 decline in the past 5 years. Dividends were up 114.1% for the 12 months ended November 13 from $US1.56 in 2018 to $US3.34 in 2019.

9.2 Financials Summary
Year endedJun 2019Jun 2018Jun 2017
Sales (USD B)44.343.136.1
Pretax (USD B)1514.811.1
Net (USD B)8.33.75.9
EPS (USD)1.60.71.107
+ Net profit was up 124.2% from US$3.7 billion in 2018 to US$8.3 billion in 2019.
+ Earnings Per Share (EPS) was up 128.6% from 70.0c to $US1.60.

9.3 Annual Report: Key Parameters
FY2019 Annual Report: BHP Group Net Profit up 124%

Release Date: September 17, 2019
BHP Group (ASX:BHP) reported net profit for the year-ended 30 June 2019 of $US8.3b, up 124.2% from $US3.7b in the previous year. Earnings per share (EPS) were up 128.6% from 70.0c in FY2018 to $US1.6 in FY2019.

Major changes compared with previous year:
Favourable Changes:
- Interest cover up 5.4% from 10.4 to 11.0
- EBIT to total assets up from 14.6% to 16.4%
- Interest expenses to Sales down from 3.6% to 3.4%
- Interest revenue to Sales up from 0.7% to 1%
- Total non-current assets to Total Assets up from 68.6% to 76.8%
- Fixed Assets to Total Assets up from 60% to 67.5%
- Long-term investments to Total Assets up from 3.1% to 3.8%
- Total Liabilities to EBITDA of 3.0 compares favourably with the Joseph Piotroski benchmark of <5. This ratio has improved by 6% from the previous year's ratio of 3.1.
- Total Liabilities to Operating Cash Flow of 2.7 compares favourably with the Joseph Piotroski benchmark of <4. Unfavourable Changes:
- Debt to Equity up 9.1% from 0.4 to 0.5
- Current ratio down 24.7% from 2.5 to 1.9
- Working capital to total assets down from 18.9% to 10.9%
- Retained earnings to total assets down from 45.6% to 42.5%
- Total current assets to Total Assets down from 31.4% to 23.2%
- Net tangible assets per share down 12.2% from $US11.22 to $US9.85
Note:
- EBIT Margin steady at 37.4%
- Total revenue to total assets steady at 0.4
- Profit before tax to Sales down from 34.2% to 34%
- Total liabilities to Total assets steady at 0.5
- Current Inventory to Total Assets up from 3.4% to 3.8%

Annual Report [Year-on-year comparison: 2019 vs 2018]
Company Name : BHP Group Limited (BHP)   
June 3020192018Change
Description$US m$US m(%)
Sales Revenue44,28843,129Up 2.7
EBITDA16,55916,318Up 1.5
EBIT16,55916,318Up 1.5
Interest1,5101,567Down 3.6
Pre-Tax Profit/(Loss)15,04914,751Up 2
Working Capital11,03421,141Down 47.8
Current Assets23,37335,130Down 33.5
Current Liabilities12,33913,989Down 11.8
Shareholders' Funds47,24055,592Down 15
Total Liabilities49,03751,323Down 4.5
Total Assets100,861111,993Down 9.9
Current Debt1,7882,874Down 37.8
Non-Current Debt23,16724,069Down 3.7
Total Debt24,95526,943Down 7.4
Operating Cash Flow17,87118,461Down 3.2
Net Assets51,82460,670Down 14.6
Net Tangible Assets51,14959,892Down 14.6
AuditorKPMG  

Year-on-year comparison of Per Share figures
June 3020192018Change (%)
Description$US $US  
Sales8.58.1Up 5.5
EBIT3.23.1Up 4.3
EBITDA3.23.1Up 4.3
Shareholders' Funds9.110.4Down 12.7
Total Liabilities9.59.6Down 1.8
Total Assets19.521Down 7.5
Current Debt34.5c54 cDown 36.1
Non-Current Debt4.54.5Down 1.1
Total Debt4.85.1Down 4.8
Net Tangible Assets9.811.2Down 12.2

Year-on-year comparison of Performance Ratios
June 3020192018Change (%)
Return on Equity (%)18.412.8Up 43.7
Return on Assets (%)9.46.9Up 36.2
Total debt to net tangible assets (%)48.845Up 8.4
Total Liabilities to Operating Cash Flow2.72.8Down 1.4
Debt/Equity0.50.4Up 9.1
Total Liabilities/Total Assets (Up 6.5% from 0.46 to 0.49)0.50.5Up 6.5
Interest Cover1110.4Up 5.4
Current Ratio1.92.5Down 24.7
Common Size Ratios by Assets %   
Total non-current assets to Total Assets 76.8 68.6 Up 11.9
Fixed Assets to Total Assets 67.5 60.0 Up 12.5
Total current assets to Total Assets 23.2 31.4 Down 26.0
Long-term investments to Total Assets 3.8 3.1 Up 22.6
Current Inventory to Total Assets 3.8 3.4 Up 13.1
Common Size Ratios by Sales %   
Profit before tax to Sales 34.0 34.2 Down 0.6
Interest expenses to Sales 3.4 3.6 Down 6.4
Interest revenue to Sales 1.0 0.7 Up 33.9
Tax expenses to Sales (12.5) (16.2) Up 23.1


Five-year record of growth and performance:
In the last 5 years Total Revenue averaged $US39.9B, EBITDA averaged $US11.2B and Net Profit averaged $US3.9B. Compound Annual Growth Rate (CAGR) averaged -5.7% for Total Revenue, -9.7% for Net Profit and -11.5% for EBITDA.
DescriptionAnnual ($US B)5-year Avg ($US B)5-year CAGR %
Total Revenue44.339.9(5.7)
EBITDA16.611.2(11.5)
Operating Profit16.69.3(6.1)
Net Profit8.33.9(9.7)

Five-year record of EBITDA, Operating Profit, Net Profit, ROE, ROA and ROCE
In 2019 Net Profit Margin of 21.5% was above its 5-year Avg of 8.4% (All Figures in %)
Description20195-year Avg
EBITDA Margin37.425.3
Operating Profit Margin37.421.2
Net Profit Margin21.58.4
Return on Equity18.46.7
Return on Assets9.43.7
Return on Capital Employed18.79.6

SECTION 10 CORPORATE PROFILE

10.1 Activities
BHP Group Limited (BHP, formerly BHP Billiton Limited) is a diversified natural resources company producing commodities along with substantial interests in oil and gas. BHP's principal business lines are mineral exploration and production as well as petroleum exploration, production and refining. BHP's assets, operations and interests are separated into Petroleum and Potash, Copper, Iron ore, Coal and Nickel.

10.2 Top Management
The chairman is Ken Mackenzie, the chief executive officer is Andrew Mackenzie and the chief financial officer is Peter Beaven.

10.3 Issued Capital and MCap
Based on 5,180,000,000 issued shares the market capitalisation is $A190.6 billion.

10.4 Vanguard Total World Stock ETF 7627:
The stock was one of 7627 global stocks selected by Vanguard Total World Stock ETF (VT) who sold 26,570 shares in the period Jul 31, 2019 to Aug 31, 2019 worth $US-980,327 at an estimated Volume Weighted Average Price (VWAP) of $US36.896. As at Aug 31, 2019, the Vanguard Total World Stock ETF held 948,039 shares worth $US23,481,405 or 0.14% by value of the ETF's portfolio [Ranked 105 out of 7627 by value and 2 out of 235 for Australia].

COMPANY IDENTIFIERS
Contact: (61) 1300 55 47 57
Physical Address: Level 18, 171 Collins Street, MELBOURNE, VIC, AUSTRALIA, 3000
State/Province/Country: Australia
Exchange: Australian Securities Exchange

Economic Sector: Basic Materials
Business Sector: Mineral Resources
Industry Group: Metals & Mining
Industry: Specialty Mining & Metals

ISIN: AU000000BHP4
AU:BHP; ASX:BHP; AX:BHP; BHP.AX
PermID: 4295856983
RIC: BHP.AX

Bhp Billiton Limited, Bhp Billiton Ltd

For comprehensive research on BHP Group Limited, including details from the latest Annual Report and extensive financial data, please search by Company Name on source name "News Bites Stock Review" on Lexis-Nexis platforms.

Source: www.BuySellSignals.com