Wednesday tips round-up: BHP Billiton, CRH
BHP Group Limited NPV (DI)
2,278.00p
08:49 26/04/24
Construction & Materials
9,763.92
08:50 26/04/24
CRH (CDI)
6,210.00p
08:49 26/04/24
FTSE 100
8,123.93
08:50 26/04/24
FTSE 350
4,460.35
08:50 26/04/24
FTSE All-Share
4,413.50
08:50 26/04/24
Mining
10,535.23
08:49 26/04/24
As the Financial Times' Lex column would have it, the heads of BHP Billiton may yet stand accused of imperial overreach in the eyes of shareholders. As the man on the street would put it, bigger is not always better. To address the situation the company has announced its intention to demerge assets spread over four continents, including the two largest silver and manganese mines on the planet. Nevertheless, the combined market capitalisation of the above may only reach $15bn. Hence, while by no means as great as ancient Rome the mining giant may still be stretched out too thin.
Some investors were also looking for additional cash returns, which in the event were postponed. However, with a pay-out ratio already above 45% immoderation, rather than miserliness, might be the greater of the two evils facing the company. Lastly, management has embarked on a volume strategy in iron ore, instead of protecting prices. How sustainable will that prove? "Unknown. Empire: it pays to look ahead," says Lex.
Irish construction outfit CRH's latest set of half yearly results are a tad misleading. Revenues sped ahead by 4%, led by a 7% increase in its European sales while in the US revenues were up by only 1%. However, the strong growth in the former can be put down to weak comparables in the year ago period, while the company's performance in the US was weighed down by poor weather. As the company's chief, Albert Manifold, explained, what is expected to unfold over the coming six months is exactly the opposite. Sales growth will recover Stateside while the European figures were a 'false dawn'.
Pre-tax profits meanwhile, higher at €61m following a loss of €71m a year back, didn't impress the City. In any case, and even regardless of the outlook for the company's markets, the stock is now trading on 20 times' this year's forecast earnings and 14 times' 2015's. Hence, The Times' Tempus writes that "CRH's valuation is a bit too rich and there is no reason to change that opinion based on these numbers".
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