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BHP Billiton downgraded by Credit Suisse on lack of ‘real catalysts’

It is now rated as 'neutral' by the Swiss bank and the price target drops to 1,450p.

BHP Group PLC - BHP Billiton downgraded by Credit Suisse on lack of ‘real catalysts’

Credit Suisse is pumping the breaks on BHP Billiton Plc (LON:BHP), downgrading to ‘neutral’, as it cautions that the mining major is “missing real catalysts”.

Dropping from a prior ‘outperform’ rating the Swiss bank at the same time cuts its price target to 1,450p from 1,500p.

Analyst Carsten Riek, in a note, said that Billiton’s current share is “fair”.

READ: Decarbonisation trends lead Deutsche Bank to downgrade BHP

“We still regard BHP’s balance sheet as being robust and see little risk to dividends with FY20E yields at 5%. However, we think yields are no longer attractive enough to serve as a trigger to push the stock price higher,” Riek said.

Among whatever catalysts may be present, the Credit Suisse noted that the ESG – Ethical, Societal and Governance – angle is “starting to play out” in the sector though he suggests more will need to be done at Billiton before it is something that can re-rate the shares.

Riek noted that should BHP sell its Hunter Valley thermal coal assets, in a rumoured US$1.5-1.8bn deal, the miner’s emissions metric could fall by 5%, and a further divestment of its 33% stake in the Cerrejon open pit coal mine (the company is said to be exploring deal options) could see emissions drop by 12% in total.

“However, to make a difference for investors and to justify a re-rating BHP may be required to re-think its metallurgical coal and petroleum business. Such as step could reduce the carbon footprint by >52%,” the analyst added.

Elsewhere today, the Credit Suisse mining team also raised its target for Rio Tinto PLC (LON:RTO) to 3,900p from 3,700p whilst sticking to an ‘underperform’ rating.

It rates Glencore PLC (LON:GLEN) as ‘neutral’ and lifted its target price to 180p from 170p, and a 200p target is set for Ferrexpo PLC (LON:FXPO) which is rated as ‘outperform’.

Quick facts: BHP Group PLC

Price: 1702.2 GBX

Market: LSE
Market Cap: £86.09 billion

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