What’s New With Stocks Close to Investors' Heart – Rio Tinto, BHP Group, Macquarie Group?

  • Nov 11, 2019 AEDT
  • Team Kalkine
What’s New With Stocks Close to Investors' Heart – Rio Tinto, BHP Group, Macquarie Group?

We would be discussing three large cap stocks where we find higher investors’ presence and participation, irrespective of the market sentiment. Over the years, these three diversified stocks have delivered stable return to the investor’s portfolio.

Let’s discuss Rio Tinto (1-year return of 22.33%), BHP Group (1-year return of 16.72%) and Macquarie Group (1-year return of 11.9%), as on 8 November 2019. These three stocks are considered under the blue-chip category because of the strong business model they follow, and the positive returns delivered to shareholders.

Rio Tinto Limited (ASX: RIO)

Rio Tinto Limited is engaged in the production of copper, gold, iron ore, coal, aluminium, borates, titanium dioxide and other minerals and metals.

Highlights from Latest Investor Seminar Presentation: During the latest investor seminar held on 31 October 2019, the Management of RIO highlighted about the business outlook and as well as sectorial overview of the business.

As per the commentary, the potential of commodity and resource sector is likely to remain bright, on account of growing commodity demand across the globe, primarily from the developing economies. As per the forecasts, global steel consumption is expected to grow by ~1% to ~2% in coming years. Chinese steel production is expected to peak in early 2020, compensated by growing demand from economies like India and other Asian countries.

The global demand for aluminium is expected to grow by ~2% to ~2.5%. Same rate of growth is expected from China in the next decade, compared to ~11% growth rate in the current decade.

Copper’s demand is expected to grow by ~1.5% to ~2.5%, driven by transport electrification and increased renewables.

For RIO, the EBITDA margin from the iron ore segment stood at 63%, followed by aluminium at 28%. EBITDA margin of copper and minerals came in at 40% and 31%, respectively (as on 30 June 2019).

Production Highlights: Third quarter production from Pilbara came in at 87.3 million tonnes, an increase of 6% on y-o-y basis and 10% from the previous quarter. RIO reported its work in progress as per planned.

Rio Tinto Limited

Quarterly Production Highlights (Source: Company Reports)

Guidance: As per the Management guidance, total productivity capital expenditure in CY19 is expected at ~$0.5 billion. Further, the company has given guidance for 2020 at around $7 billion while guidance for 2021 remains unchanged at around $6.5 billion.

Stock Update: RIO quoted at $92.92, down 2.4% at 2:32 PM AEST on 11 November 2019. The market capitalization is ~$35.35 billion while the stock is available at a price to earnings ratio of 8.3x. At current market price, the stock has an annualized dividend yield of ~4.94%. 52-week trading range of the stock stood at $68.169 to $106.922. The stock has given return of 7.58% and 0.24% during the last three-months and six-months, respectively.

BHP Group Limited (ASX: BHP)

BHP Group Limited operates in minerals exploration, production and processing activities of coal, iron ore, copper and manganese ore followed by exploration and refining of hydrocarbon.

In accordance with ASX Listing Rule 3.16.3, BHP informed that Ernst & Young has been appointed as the company’s external auditor post the resignation of KPMG. Ernst & Young was scheduled to take charge from 7 November 2019 onwards.

Performance Highlights for Quarter ended September 2019: Copper equivalent production during the September quarter declined 3%, on account of natural field decline in petroleum and planned maintenance across a number of operations.

In the petroleum segment, BHP encountered Trion 3-DEL appraisal well in Mexico with oil in the reservoirs up dip from all previous well intersections. The company informed about its successful completion of Phase 4 of the deepwater drilling campaign in Trinidad and Tobago, while evaluation and development planning studies of the discoveries from Phase 4 remain under progress.

Outlook: As per the Management guidance, volumes for FY20 are expected to be slightly higher than the last financial year. As per the commentary, BHP is likely to commence next drilling phase in November 2019. Petroleum production for FY20 is expected at 110-116 MMboe, copper at 1,705 -1,820 kt. Iron ore is expected to be produced at 242 to 253 Mt followed by nickel at ~87 kt. Production of metallurgical coal and energy coal are forecast at 41 to 45 Mt and 24 to 26 Mt, respectively.

BHP Group Limited

FY20 Production Guidance (Source: Company Reports)

Stock Update: BHP quoted $37.08 with a market capitalization of $109.88 billion at 2:41 PM AEST on 11 November 2019. 52-week trading range of the stock stood at $29.062 to $42.330. At the current market price, the stock has delivered an annualized yield of 5.14%, and is available at a price to earnings multiple ratio of 16.32x. During the last three-months and six-months, the stock has generated returns of 0.32%.

Macquarie Group Limited (ASX: MQG)

Macquarie Group Limited is involved in offering financial services like banking, financial, advisory, investment and funds management services.

Operating Highlights for H1FY20: MQG reported its first half results for FY20 wherein the company reported net operating income at $6,320 million, up 8% on y-o-y basis and net profit of $1,457 million as compared to $1,310 million in H1FY19.

The company reported operating profit before income tax at $1,840 million as compared to $1,705 million in the previous corresponding period. During the half, MQG reported Macquarie Asset Management (MAM) at $1,717 million, up 11% on pcp terms. Banking and Financial Services during the half was reported growth in total BFS deposits, the Australian loan portfolio and funds on platform partially offset by a decrease in Australian vehicle finance portfolio.

Dividend Distribution: MQG announced a 40% franked dividend of AUD 2.500 payable on 18 December 2019. At current market price of $136.04 (as at 3:04 PM AEST on 11 November 2019), the stock has a dividend yield of ~4.43%.

Stock Update: The market capitalisation of the company stood at $48.81 billion, and the stock is available at a price to earnings multiples of 14.89x on trailing twelve months basis.


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