Bayon Financial

Graeme Cunningham

Independent Insight Provider

Bayon Financial provides industry and company analysis focusing on mid and small cap equity research coverage across a range of sectors including mining, financials and telecoms.

Equity Bottom-Up

BHP Group Ltd operates as an international resources company. The Company offers mineral exploration and production, including coal, iron ore, gold, titanium, ferroalloys, nickel, and copper concentrate, as well as petroleum exploration, production, and refining. BHP Group serves customers worldwide.

<ul>
<li>BHP announced an AUD1.5bn (US$1.0bn) deal with Aurizon for transport logistics for South Australia Copper, which could affect about 5% of EBITDA and reduce costs marginally</li>
<li>The shares declined over the past month on declining iron ore and coal prices, and while copper has risen on supply side issues, we see risks of a H2/25 drop</li>
<li>The company looks about fairly valued on an ROE to P/B comparison versus its Australian peers and the current price is almost exactly inline with our DCF valuation </li>
</ul>


BHP announced an AUD1.5bn (US$1.0bn) deal with Aurizon for transport logistics for South Australia Copper, which could affect about 5% of EBITDA and reduce costs marginally
The shares declined over the past month on declining iron ore and coal prices, and while copper has risen on supply side issues, we see risks of a H2/25 drop
The company looks about fairly valued on an ROE to P/B comparison versus its Australian peers and the current price is almost exactly inline with our DCF valuation 


Marginal Cost Reduction from Copper Shipment Deal

NAC Kazatomprom JSC produces and markets minerals. The Company specializes in natural uranium production. NAC Kazatomprom also imports and exports uranium compounds, nuclear power plant fuel, and uranium components. NAC Kazatomprom serves customers worldwide.

<ul>
<li>U.S. political moves last month backing nuclear power are part of a long-term secular trend of increasing global support for the industry which could drive a uranium rebound </li>
<li>A nearly 40% uranium slump from early 2024 to March 2025 has priced in a significant degree of the industry’s challenges, and a price recovery has started </li>
<li>As the world’s largest producer, Kazatomprom is well positioned for a rise in uranium, it has lagged the recent sector rebound, and trades at a moderate 1.4x P/B ratio  </li>
</ul>


U.S. political moves last month backing nuclear power are part of a long-term secular trend of increasing global support for the industry which could drive a uranium rebound 
A nearly 40% uranium slump from early 2024 to March 2025 has priced in a significant degree of the industry’s challenges, and a price recovery has started 
As the world’s largest producer, Kazatomprom is well positioned for a rise in uranium, it has lagged the recent sector rebound, and trades at a moderate 1.4x P/B ratio  


Kazatomprom: Largest Global Producer Well Positioned for Uranium Rebound

<ul>
<li>A volatile metal price has boosted the risk for BHP’s remaining strong major segment, copper, while the other two key divisions, iron ore and coal, are still sluggish</li>
<li>We forecast a weaker 2025E-2026E than consensus, given the risk that global demand disappoints and continues to pressure metal prices for BHP’s three key segments</li>
<li>Our conservative valuation puts BHP near fair value, and while the P/B of 2.4x is only moderately elevated versus recent history, we see the risks weighted to the downside</li>
</ul>


A volatile metal price has boosted the risk for BHP’s remaining strong major segment, copper, while the other two key divisions, iron ore and coal, are still sluggish
We forecast a weaker 2025E-2026E than consensus, given the risk that global demand disappoints and continues to pressure metal prices for BHP’s three key segments
Our conservative valuation puts BHP near fair value, and while the P/B of 2.4x is only moderately elevated versus recent history, we see the risks weighted to the downside


BHP: Last Strong Driver (Copper) Turns Volatile

PT Vale Indonesia Tbk produces nickel in matte, an intermediate product, from lateritic ores at its integrated mining and processing facilities near Soroako, Sulawesi

<ul>
<li>Vale Indonesia's Q1/25 net profit beat estimates only on non-core items, with a reversal to a gain from Q1/24 on the fair value recognition of a derivative asset </li>
<li>Core earnings declined yoy on an unexpected maintenance shutdown-driven decline in volume and nickel price drop which offset a decline in costs</li>
<li>Trading at a P/B of 0.5x and with peers also well below 1.0x, much of the industry's current distress has been priced in, but immediate catalysts are few </li>
</ul>


Vale Indonesia's Q1/25 net profit beat estimates only on non-core items, with a reversal to a gain from Q1/24 on the fair value recognition of a derivative asset 
Core earnings declined yoy on an unexpected maintenance shutdown-driven decline in volume and nickel price drop which offset a decline in costs
Trading at a P/B of 0.5x and with peers also well below 1.0x, much of the industry's current distress has been priced in, but immediate catalysts are few 


Vale Indonesia: Still Battling Nickel Price Decline in Q1/25

<ul>
<li>Vale Indonesia's Q4/24 results came in -28% below expectations driven mainly by a revenue decline, as core costs fell, and other expenses and net financing income rose</li>
<li>The revenue drop was from by a -7.1% decline in volume and -11.5% drop in the nickel matte price, while fuel efficiency improved and fuel costs dropped overall</li>
<li>The P/B continued to slide in Q4/24 to 0.82, along with an ROE down to 1.0%, but even given the inexpensive multiple, weak nickel could weigh on the stock</li>
</ul>


Vale Indonesia's Q4/24 results came in -28% below expectations driven mainly by a revenue decline, as core costs fell, and other expenses and net financing income rose
The revenue drop was from by a -7.1% decline in volume and -11.5% drop in the nickel matte price, while fuel efficiency improved and fuel costs dropped overall
The P/B continued to slide in Q4/24 to 0.82, along with an ROE down to 1.0%, but even given the inexpensive multiple, weak nickel could weigh on the stock


Vale Indonesia: Q4/24 Earnings Drop on Volume, Nickel Price Decline

Independent Insight Provider, Bayon Financial

Mr. Cunningham is a CFA Charterholder with over 15 years of experience as an equity research analyst, mostly on the sell side at investment banks, including Goldman and Jefferies, and with some time on the buy side. He has covered the consumer, telecoms, financials, energy and mining sectors, with a focus mainly on Southeast Asia, including Thailand and Vietnam.

Graeme Cunningham
Independent Insight Provider
• Bayon Financial

Marginal Cost Reduction from Copper Shipment Deal

BHP's South Australia Copper logistics and infrastructure deal will marginally reduce costs, downside risks remain for its metal prices and it...

Graeme Cunningham

Kazatomprom: Largest Global Producer Well Positioned for Uranium Rebound

Kazatomprom is well positioned to benefit from a uranium rebound, with a year-long price slump pricing in the industry's short-term challenges and...

Graeme Cunningham

BHP: Last Strong Driver (Copper) Turns Volatile

BHP's last remaining strong division, copper, is at risk from a recently volatile metal price, while its other two key segments iron ore and copper...

Graeme Cunningham

Vale Indonesia: Still Battling Nickel Price Decline in Q1/25

Vale Indonesia's Q1/25 net income beat on non-core items but core operations declined on an unexpected maintenance-driven volume decline and lower...

Graeme Cunningham

Vale Indonesia: Q4/24 Earnings Drop on Volume, Nickel Price Decline

Vale Indonesia's Q4/24 missed expectations mainly on a revenue drop, driven by a volume and price decline, as core costs edged down, and while...

Graeme Cunningham