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Is BHP Looking Better Than Ever?

Fundamentally, BHP is an improving business and potentially has more upside as the Company embarks on a growth drive. As the world’s biggest miner with a market cap of approximately $130 billion, the Company can reap the benefits of the current improving resources environment and potentially, recover its share price over time.

The Iron Ore price as we have seen since early 2016, has been on a fantastic run, and we have also been able to observe the bullish run of the  ASX Materials Index in the same corresponding period. Just look it up on the charts!

As these catalysts keep pushing BHP forward, we expect the improvement and growth to trickle through to the bottom line and potentially, this could even lead to large returns of cash in the form of dividends, to be distributed to the shareholders over the next 12 to 24 months. Now who doesn’t want a dividend?

Their recent report highlights for the Year Ended June 2017, basic earnings per share was $1.107, and at current prices of $26.50, this translates to ~24x FY17 earnings. Not overly demanding if the resources sector continues to recover, and if Iron Ore also continues to appreciate.

Overall, an attractive investment proposition in terms of capital gains and dividends, and our judgement falls somewhere between a Hold and a Buy.

What are your thoughts on the sector?



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