This morning I added BHP to the private portfolio, paying AUD37.65 per share. No only does it add some further diversification to the portfolio (although, I suspect, still correlated to some extent with the local market here in Hong Kong), it also looks relatively cheap given the very significant free cash flow the company is generating, the relatively controlled capex and the undergeared balance sheet (the company would have net cash next year in the absence of the Potash bid succeding or a similar investment project). In my view, the market is at least partly pricing in the possibility of MRRT being introduced and/or taking a negative view on the Potash bid.
Contrary to some comentators I have, so far, been impressed by both the logic of the bid for Potash and the way in which the bid has been handled. While the possibility of a higher bid being made exists, I do not belive that BHP would pay a price which was not value accretive to BHP shareholders. If the Potash bid fails, the possibility of a share buy back or special dividend exists.
The dividend yield of 2.7% is rather modest by Australian standards.
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