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BHP Billiton PLC (SA)
26 September 2014
Amidst the news that BHP Billiton is looking to list a spin-off of the natural resources company on the Johannesburg, Sydney and London exchanges. This would relate to the aluminum, coal, manganese, nickel and silver assets amounting to about $16 billion. In a recent article written by in-house analyst Shaun Murison, nickel, aluminum and manganese only accounted for about 1% of the group’s Earnings Before Interest and Tax (EBIT). The headquarters for such a company would be based in Perth and existing shareholders will receive shares on a pro-rata basis. The company may benefit from tax breaks through multiple listings, but this also allows institutional and retail investors across the continents to gain exposure to company shares.
Technical analysis
The share price reacted positively to the news and we saw a small bounce and some relief buying at the current level, with support at the current price. There are major concerns around an economic slowdown in China and softer commodity prices are the topic of conversation at the moment. Although clients may benefit from the pro-rata allocation, once the split occurs traders should still take caution. The company has announced a pay freeze for its senior management and the CEO, stating that it would remain unchanged for 2015, as well as cutting 700 jobs in a joint-venture in Queensland. Cause for concern would be the share price breaking below the 200 day moving average, and whilst it is technically oversold on the RSI, shares can remain this way for some time before correcting. - Leigh Riley, Premium Client Manager
BHP Billiton PLC, 26/09/2014
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