Morgans factors in a share buyback utilising a portion of the net proceeds from the sale of the US onshore oil & gas business. The remainder, the broker assumes, is distributed via a special dividend.
Morgans expects BHP to be less affected by rising costs relative to peer Rio Tinto ((RIO)). This is because of a positive correlation to rising energy prices, given its petroleum division, and a lack of exposure to aluminium. Add rating is maintained. Target rises to $37.09 from $35.79.
Target price is $37.09.Current Price is $34.10. Difference: $2.99 – (brackets indicate current price is over target). If BHP meets the Morgans target it will return approximately 8% (excluding dividends, fees and charges – negative figures indicate an expected loss).