vk.com/id446425943
Anglo American – BUY
Renaissance Capital
3 December 2018
Steel
Figure 67: Anglo American, $mn (unless otherwise noted)
|
|
|
|
Anglo American |
AGLJ.J |
Target price, ZAR: |
340 |
Market capitalisation, $mn: |
29,022 |
Share price, ZAR: |
280 |
Enterprise value, $mn: |
43,428 |
Potential 12-month return: |
28.2% |
Dec-YE |
|
|
2016 |
2017 |
2018E |
2019E |
2020E |
Income statement |
|
|
|
|
|
|
|
Revenue |
|
|
23,142 |
28,650 |
29,392 |
28,419 |
28,522 |
Underlying EBITDA |
|
|
6,104 |
8,823 |
9,231 |
9,584 |
8,681 |
Underlying EBIT |
|
|
3,822 |
6,247 |
6,529 |
6,854 |
5,900 |
Net interest |
|
|
-567 |
-635 |
-483 |
-312 |
-238 |
Taxation |
|
|
-821 |
-1,770 |
-2,011 |
-2,071 |
-1,794 |
Minority interest in profit |
|
|
-329 |
-891 |
-894 |
-928 |
-877 |
Net profit for the year |
|
|
1,594 |
3,166 |
2,946 |
3,542 |
2,991 |
Underlying earnings |
|
|
2,210 |
3,272 |
3,221 |
3,542 |
2,991 |
Underlying EPS, USc |
|
|
172 |
257 |
253 |
279 |
235 |
Thomson Reuters consensus EPS, USc |
|
|
|
242 |
249 |
231 |
|
DPS declared, USc |
|
|
0 |
102 |
101 |
139 |
223 |
Underlying EBIT |
|
|
185 |
512 |
842 |
974 |
1,186 |
Platinum |
|
|
|||||
EBIT margin |
|
|
4% |
10% |
15% |
21% |
24% |
Diamonds |
|
|
1,019 |
873 |
801 |
846 |
870 |
EBIT margin |
|
|
17% |
15% |
13% |
14% |
13% |
Copper |
|
|
261 |
923 |
1,255 |
1,192 |
1,000 |
EBIT margin |
|
|
9% |
22% |
26% |
26% |
23% |
Nickel |
|
|
-15 |
0 |
106 |
150 |
136 |
EBIT margin |
|
|
-4% |
0% |
19% |
24% |
21% |
Iron ore and manganese |
|
|
1,275 |
1,978 |
1,096 |
1,455 |
1,386 |
EBIT margin |
|
|
46% |
57% |
33% |
47% |
45% |
Coal |
|
|
1,112 |
2,274 |
2,713 |
2,548 |
1,635 |
EBIT margin |
|
|
21% |
32% |
37% |
36% |
26% |
Other |
|
|
-15 |
-313 |
-285 |
-312 |
-314 |
Underlying EBIT |
|
|
3,822 |
6,247 |
6,529 |
6,854 |
5,900 |
Income statement ratios |
|
|
|
|
|
|
|
EBITDA margin |
|
|
26% |
31% |
31% |
34% |
30% |
EBIT margin |
|
|
17% |
22% |
22% |
24% |
21% |
EPS Growth |
|
|
169% |
49% |
-1% |
10% |
-16% |
Dividend payout ratio |
|
|
0% |
40% |
40% |
50% |
95% |
Input assumptions |
|
|
|
|
|
|
|
$/ZAR |
|
|
14.70 |
13.31 |
13.24 |
14.00 |
13.98 |
Platinum, $/oz |
|
|
988 |
950 |
879 |
925 |
1,093 |
Copper, USc/lb |
|
|
221 |
280 |
298 |
295 |
298 |
Hard coking coal, $/t |
|
|
114 |
210 |
204 |
194 |
173 |
Iron ore fines (62%Fe, CIF China), $/t |
|
|
58 |
71 |
66 |
65 |
64 |
Required breakeven price |
|
|
|
|
|
|
|
Breakeven price - 3PGM, $/oz |
|
|
754 |
774 |
798 |
752 |
709 |
Breakeven price - copper, USc/lb |
|
|
198 |
216 |
206 |
215 |
232 |
Breakeven price - coking coal, $/t |
|
|
85 |
129 |
121 |
118 |
119 |
Breakeven price - Export thermal coal, $/t |
|
46 |
59 |
59 |
61 |
69 |
|
Sales volumes |
|
|
|
|
|
|
|
Platinum, koz |
|
|
2,416 |
2,505 |
2,430 |
2,000 |
2,000 |
Diamonds, mn ct |
|
|
11 |
15 |
14 |
11 |
11 |
Total iron ore, mnt |
|
|
59 |
61 |
46 |
59 |
66 |
Total copper (incl. Angloplat), kt |
|
|
572 |
574 |
635 |
632 |
627 |
Metallurgical coal, mnt |
|
|
20.7 |
19.8 |
21.2 |
22.0 |
22.0 |
Attributable Cu eq volumes, kt |
|
|
2,923 |
2,875 |
2,654 |
2,714 |
2,783 |
Volume growth |
|
|
0.3% |
-1.6% |
-7.7% |
2.2% |
2.6% |
Contribution to FY18E attributable underlying EBITDA |
|
|
|
||||
|
|
|
|
Platinum (80% of |
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|
|
|
|
|
|
AMS) |
|
|
|
|
|
|
|
11% |
|
Diamonds (85% of |
|
Coal |
|
|
|
|
|
De Beers) |
|
38% |
|
|
|
|
|
13% |
|
|
|
|
|
|
|
Copper |
|
Samancor |
|
|
|
|
Nickel |
16% |
|
Manganese |
|
|
|
|
|
|
|
Minas Rio Kumba Iron Ore |
2% |
|
|
||||
8% |
|
|
|||||
|
-6% |
(51%) |
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|
|
||
|
|
|
|
|
|||
|
|
|
|
8% |
|
|
|
Dec-YE |
|
|
|
2018E |
2019E |
2020E |
2016 |
2017 |
|
||||
Balance sheet |
|
|
|
|
|
|
Net operating assets |
32,315 |
33,172 |
|
32,006 |
31,885 |
32,621 |
Financial instruments |
497 |
211 |
|
170 |
200 |
210 |
Equity |
19,016 |
22,972 |
|
23,419 |
25,394 |
26,090 |
Minority interest |
5,309 |
5,910 |
|
5,717 |
5,949 |
6,168 |
Net debt |
8,487 |
4,501 |
|
3,040 |
742 |
572 |
Balance sheet ratios |
|
|
|
|
|
|
Gearing* |
30.9% |
16.4% |
|
11.5% |
2.8% |
2.1% |
Net debt to EBITDA |
1.4x |
0.5x |
|
0.3x |
0.1x |
0.1x |
RoCE |
10.8% |
17.8% |
|
19.2% |
21.0% |
17.4% |
RoIC (after tax) |
6.0% |
15.1% |
|
10.6% |
15.3% |
11.7% |
RoE |
12.4% |
15.6% |
|
13.9% |
14.5% |
11.6% |
Cash flow statement |
|
|
|
|
|
|
Operating cash flow |
4,573 |
8,101 |
|
6,161 |
8,208 |
6,819 |
Capex (net of disposals) |
-2,388 |
-2,150 |
|
-2,223 |
-3,505 |
-3,630 |
Other cash flows |
2,045 |
-688 |
|
-182 |
0 |
0 |
FCF |
4,230 |
5,263 |
|
3,756 |
4,703 |
3,190 |
Equity shareholders' cash |
4,423 |
4,607 |
|
2,772 |
3,866 |
2,464 |
Dividends and share buy-backs |
0 |
-621 |
|
-1,311 |
-1,567 |
-2,295 |
Surplus (deficit) cash |
4,423 |
3,986 |
|
1,461 |
2,298 |
170 |
Cash flow ratios |
|
|
|
|
|
|
Working capital days |
52 |
33 |
|
31 |
22 |
23 |
Capex/EBITDA |
43.4% |
28.0% |
|
28.6% |
42.6% |
48.0% |
FCF yield |
15.9% |
16.9% |
|
10.8% |
14.4% |
9.7% |
Equity shareholders' yield |
34.7% |
22.1% |
|
10.6% |
14.8% |
9.5% |
Cash conversion |
2.0x |
1.4x |
|
0.9x |
1.1x |
0.8x |
Valuation |
|
|
|
|
|
|
SoTP DCF fair value and calculation of target price |
|
$mn |
ZAR/sh |
|||
Platinum |
|
|
|
|
7,477 |
81.0 |
Diamonds |
|
|
|
|
7,779 |
84.3 |
Coal |
|
|
|
|
8,496 |
92.0 |
Copper |
|
|
|
|
6,188 |
67.0 |
Nickel |
|
|
|
|
1,189 |
12.9 |
Kumba Iron Ore |
|
|
|
|
3,295 |
35.7 |
Samancor manganese |
|
|
|
|
3,565 |
38.6 |
Anglo Ferrous Brazil |
|
|
|
|
1,661 |
18.0 |
Corporate & other |
|
|
|
|
-3,754 |
-40.7 |
Total enterprise value excluding minority interests |
|
|
|
35,897 |
388.8 |
|
Attributable net debt as at 31 December 2017 |
|
|
|
-4,490 |
-48.6 |
|
Investments as at 31 December 2017 |
|
|
|
|
211 |
2.3 |
Equity value as at 30/11/2018 |
|
|
|
|
31,618 |
342.5 |
Rounded to |
|
|
|
|
|
340.0 |
Share price on 29/11/2018 |
|
|
|
|
|
280.0 |
Expected share price return |
|
|
|
|
|
21.4% |
Plus: expected dividend yield |
|
|
|
|
|
6.8% |
Total implied one-year return |
|
|
|
|
|
28.2% |
Share price range, ZAR: |
|
|
|
|
|
|
12-month high on 4/10/2018 |
336 |
12-month low on 7/12/2017 |
241 |
|||
Price move since high |
-16.6% |
Price move since low |
|
16.2% |
||
Calculation of discount rate |
|
|
|
|
|
|
WACC |
9.5% |
Cost of debt |
|
|
5.0% |
|
Risk-free rate |
4.0% |
Tax rate |
|
|
30% |
|
Equity risk premium |
5.0% |
After-tax cost of debt |
|
3.5% |
||
Beta |
1.30 |
Debt weighting |
|
15% |
||
Cost of equity |
10.5% |
Terminal growth rate |
|
3.0% |
||
Valuation ratios |
|
|
|
|
|
|
Dec-YE |
2016 |
2017 |
|
2018E |
2019E |
2020E |
P/E multiple |
5.8x |
6.4x |
|
8.1x |
7.4x |
8.7x |
Dividend yield |
0.0% |
6.2% |
|
4.9% |
6.8% |
10.9% |
EV/EBITDA |
4.8x |
4.1x |
|
4.5x |
4.0x |
4.3x |
P/B |
0.7x |
0.9x |
|
1.1x |
1.0x |
1.0x |
NAV per share, $ |
14.8 |
18.0 |
|
18.4 |
20.0 |
20.5 |
NAV per share, ZAR |
217 |
240 |
|
244 |
280 |
287 |
* Gearing defined as net debt/(net debt +equity)
Source: Bloomberg, Thomson Reuters, Company data, Renaissance Capital estimates
41
vk.com/id446425943
BHP – HOLD
Renaissance Capital
3 December 2018
Steel
Figure 68: BHP, $mn (unless otherwise noted) |
|
|
|
BHP |
BILJ.J |
Target price, ZAR: |
310 |
Market capitalisation, $mn: |
101,206 |
Share price, ZAR: |
269 |
Enterprise value, $mn: |
123,358 |
Potential 12-month return: |
25.6% |
Jun-YE |
2017 |
2018 |
2019E |
2020E |
2021E |
Income statement |
|
|
|
|
|
Revenue |
38,285 |
43,650 |
42,401 |
42,673 |
41,535 |
Underlying EBITDA |
20,296 |
23,183 |
22,687 |
22,306 |
20,916 |
Underlying EBIT |
12,391 |
16,564 |
15,846 |
15,705 |
14,301 |
Net interest |
-1,431 |
-1,245 |
-1,086 |
-990 |
-918 |
Taxation |
-4,100 |
-7,007 |
-4,843 |
-4,900 |
-4,468 |
Minority interest in profit |
-332 |
-1,118 |
-919 |
-1,019 |
-1,010 |
Attributable profit |
5,890 |
4,823 |
8,998 |
8,796 |
7,904 |
Underlying attributable profit |
6,732 |
8,933 |
8,998 |
8,796 |
7,904 |
Underlying EPS, USc |
127 |
168 |
175 |
174 |
156 |
Thomson Reuters consensus EPS, USc |
|
|
187 |
181 |
180 |
DPS declared, USc |
83 |
118 |
243 |
157 |
156 |
Underlying EBIT |
-777 |
467 |
0 |
0 |
0 |
Petroleum - US onshore |
|||||
EBIT margin |
-36% |
47% |
- |
- |
- |
Petroleum - Conventional |
1,349 |
1,082 |
1,918 |
1,437 |
1,273 |
EBIT margin |
29% |
25% |
34% |
29% |
27% |
Copper |
1,985 |
4,330 |
2,990 |
3,726 |
3,824 |
EBIT margin |
27% |
37% |
28% |
32% |
31% |
Iron ore |
7,174 |
7,194 |
7,224 |
7,480 |
7,325 |
EBIT margin |
49% |
49% |
49% |
51% |
50% |
Coal |
3,050 |
3,683 |
3,955 |
3,306 |
2,125 |
EBIT margin |
40% |
41% |
43% |
37% |
27% |
Other |
-390 |
-192 |
-241 |
-244 |
-246 |
Underlying EBIT |
12,391 |
16,564 |
15,846 |
15,705 |
14,301 |
Income statement ratios |
|
|
|
|
|
EBITDA margin |
55% |
55% |
55% |
54% |
52% |
EBIT margin |
32% |
38% |
37% |
37% |
34% |
EPS growth |
455% |
33% |
4% |
-1% |
-10% |
Dividend payout ratio |
66% |
70% |
139% |
90% |
100% |
Input assumptions |
|
|
|
|
|
Brent crude oil, $/bbl |
51 |
64 |
70 |
65 |
63 |
Iron ore fines (62%Fe, CIF China), $/t |
69 |
67 |
65 |
65 |
63 |
Copper, USc/lb |
245 |
306 |
288 |
296 |
300 |
Hard coking coal, $/t |
190 |
200 |
194 |
179 |
159 |
$/AUD |
0.75 |
0.78 |
0.73 |
0.77 |
0.80 |
Oil breakeven price - conventional, $/boe |
29 |
37 |
49 |
48 |
45 |
Copper breakeven price, $/t |
3,752 |
4,001 |
3,930 |
3,924 |
3,968 |
Iron ore breakeven price, $/t |
34 |
34 |
36 |
39 |
35 |
Coking coal breakeven price, $/t |
81 |
92 |
91 |
92 |
101 |
Sales volumes (BHP's share) |
|
|
|
|
|
Petroleum products, MMboe* |
209 |
193 |
118 |
111 |
108 |
Iron ore, mnt |
231 |
237 |
243 |
253 |
256 |
Copper, kt |
991 |
1,238 |
1,179 |
1,235 |
1,258 |
Metallurgical coal, mnt |
38 |
41 |
44 |
45 |
45 |
Export thermal coal, mnt |
28 |
28 |
27 |
28 |
28 |
Attributable Cu eq volumes, kt |
5,993 |
6,303 |
5,917 |
6,021 |
5,913 |
Volume growth |
-6.9% |
5.2% |
-6.1% |
1.8% |
-1.8% |
Contribution to FY19E underlying EBITDA
|
US onshore |
Conventional |
Coal |
petroleum |
petroleum |
21% |
0% |
17% |
|
|
Copper |
|
|
23% |
Iron ore |
|
|
39% |
|
|
Jun-YE |
|
|
|
2019E |
2020E |
2021E |
2017 |
2018 |
|
||||
Balance sheet |
|
|
|
|
|
|
Net operating assets |
79,194 |
71,636 |
|
62,012 |
63,093 |
63,628 |
Investments |
-147 |
-32 |
|
39 |
39 |
39 |
Equity |
57,258 |
55,592 |
|
47,358 |
48,505 |
48,548 |
Minority interest |
5,468 |
5,078 |
|
5,262 |
5,466 |
5,668 |
Net debt |
16,321 |
10,934 |
|
9,431 |
9,162 |
9,452 |
Balance sheet ratios |
|
|
|
|
|
|
Gearing* |
22.2% |
16.4% |
|
16.6% |
15.9% |
16.3% |
Net debt to EBITDA |
0.8x |
0.5x |
|
0.4x |
0.4x |
0.5x |
RoCE |
13.6% |
19.5% |
|
20.6% |
21.5% |
19.3% |
RoIC |
11.0% |
14.6% |
|
14.1% |
14.5% |
12.7% |
RoE |
12.1% |
15.8% |
|
17.5% |
18.4% |
16.3% |
Cash flow statement |
|
|
|
|
|
|
Operating cash flow |
17,837 |
19,610 |
|
17,200 |
17,123 |
16,072 |
Capex (net of disposals) |
-4,252 |
-4,979 |
|
2,800 |
-8,000 |
-7,364 |
Other |
-841 |
1,159 |
|
0 |
0 |
0 |
FCF |
12,744 |
15,790 |
|
20,000 |
9,123 |
8,708 |
Equity shareholders' cash |
12,659 |
10,607 |
|
18,735 |
7,918 |
7,571 |
Dividends and share buy backs |
-2,878 |
-5,220 |
|
-17,232 |
-7,649 |
-7,861 |
Excess cash |
9,781 |
5,387 |
|
1,503 |
269 |
-290 |
Cash flow ratios |
|
|
|
|
|
|
Working capital days** |
28 |
20 |
|
25 |
25 |
26 |
Capex/EBITDA |
21% |
21% |
|
-12% |
36% |
35% |
FCF yield |
12.3% |
13.5% |
|
17.5% |
8.0% |
7.6% |
Equity shareholders' yield |
15.5% |
10.5% |
|
18.8% |
7.9% |
7.6% |
Cash conversion |
1.9x |
1.2x |
|
2.1x |
0.9x |
1.0x |
Valuation |
|
|
|
|
|
|
SoTP valuation and calculation of target price |
|
|
|
$mn |
ZAR/sh |
|
US onshore petroleum at estimated sales value |
|
|
|
10,273 |
28 |
|
Conventional petroleum |
|
|
|
|
6,185 |
17 |
Copper |
|
|
|
|
21,869 |
60 |
Iron ore |
|
|
|
|
73,724 |
201 |
Coal |
|
|
|
|
18,721 |
51 |
Other |
|
|
|
|
-3,208 |
-9 |
Enterprise value as at 30/11/2018 |
|
|
|
|
127,563 |
348 |
Net debt, investments and buy-backs |
|
|
|
|
-16,166 |
-44 |
Equity value as at 30/11/2018 |
|
|
|
|
111,397 |
304 |
Plus: One year forward FCF/share |
|
|
|
|
|
39 |
Less: DPS |
|
|
|
|
|
-28 |
TP, rounded to |
|
|
|
|
|
310 |
Share price on 29/11/2018 |
|
|
|
|
|
269 |
Expected share price return |
|
|
|
|
|
15.2% |
Plus: expected dividend yield |
|
|
|
|
|
10.4% |
Total implied one-year return |
|
|
|
|
|
25.6% |
Share price range, ZAR: |
|
|
|
|
|
|
12-month high |
327 |
12-month low |
|
226 |
||
Price move since high |
-17.6% |
Price move since low |
|
19.2% |
||
Calculation of discount rate |
|
|
|
|
|
|
WACC |
9.0% |
Cost of debt |
|
|
4.5% |
|
Risk-free rate |
4.0% |
Tax rate |
|
|
30% |
|
Equity risk premium |
5.0% |
After-tax cost of debt |
|
3.2% |
||
Beta |
1.30 |
Debt weighting |
|
20.0% |
||
Cost of equity |
10.5% |
Terminal growth rate |
|
3.0% |
||
Valuation ratios |
|
|
|
|
|
|
Jun-YE |
2017 |
2018 |
|
2019E |
2020E |
2021E |
P/E multiple |
12.1x |
11.3x |
|
11.3x |
11.3x |
12.6x |
Dividend yield |
5.4% |
6.2% |
|
12.3% |
7.9% |
7.9% |
EV/EBITDA |
5.1x |
5.0x |
|
5.0x |
5.1x |
5.5x |
P/B |
1.4x |
1.8x |
|
2.1x |
2.1x |
2.1x |
NAV per share, $ |
10.8 |
10.4 |
|
9.4 |
9.6 |
9.6 |
NAV per share, ZAR |
146 |
134 |
|
132 |
134 |
134 |
*Net debt/(net debt+equity)
**Working capital/revenue*365
Source: Bloomberg, Thomson Reuters, Company data, Renaissance Capital estimates
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