MARKET TALK: BHP Billiton Valuation Compelling - Citi

17th Jun 2010 00:20

2320 GMT [Dow Jones] Citi says the valuation on offer for BHP Billiton (BHP.AU) is too compelling to ignore, despite the headwinds of the Australian mining tax and tighter regulation of Gulf of Mexico assets. Says the mining tax could knock about US$20 billion off its valuation for the miner and the moratorium on drill permits in the Gulf will likely see BHP undershoot is oil production guidance for FY11. "Combining our worst-case scenarios for both elements would impact our DCF valuation by only US$35 billion, which is less than the US$55 billion of value destruction we argue is implied in the current share price," Citi says. Says BHP could actually emerge as a winner in the shake out after the oil spill in the gulf, as it would be in a prime position to increase its stakes in the joint ventures it has with BP (BP.LN) if the beleaguered British giant ends up selling assets. Maintains Buy rating with A$50 target price for BHP, which last traded at A$38.82. [email protected]) Contact us in Singapore. 65 64154 140; [email protected] (END) Dow Jones Newswires June 17, 2010 19:20 ET (23:20 GMT)