(Ecofin Agency) - In South Africa, analysts from investment firm Anchor Capital encourage investors to buy shares in BHP Group, a company specialized in the exploitation and sale of mining raw materials.
In a note, Anchor explained that the BHP Group’s shares are currently trading at eight times its net profit, which seems fair for a company that is the least expensive iron ore producer on the Johannesburg Stock Exchange.
The mining group has indeed reported strong financial results for its 2019/2020 year ending June 30, 2020, especially given the international situation characterized by the coronavirus, and the tensions between China and the USA, which are weighing on the world's economies. Earnings per share ended with a slight increase of 2%.
In terms of the stock market, BHP Group also held up well. As of 26 August 2020, its share value has risen by 15.03% since the beginning of the year. This increase was 20.9% for the last 12 months. The capital gain is more significant for historical shareholders, as the BHP shares have increased by 87.6% over the last ten years.
But the company has some weaknesses. The strong performance in its activities has been supported by its iron operations segment, where prices exploded during the year under review. As a result, the group continues to face a high level of indebtedness.
BHP manages to reduce its bonds, but they still stand at $12 billion. The company’s performance seems to depend on the evolution of iron prices, even though BHP is quite diversified and can rely on other segments of its business.