BHP has been actively traded in London and Australia since I can remember (2001) however this is set to change as the “Big Australian” wants to unify itself to one vehicle domiciled in Australia. This has significant ramifications to the stocks index weighting i.e. currently it is around 5.7% of the ASX200 and it will become closer to 9.5%, a whopping 66% increase leaving both Commonwealth Bank (CBA) and CSL Ltd (CSL) in its wake. There are a few interesting scenarios unfolding into 2022:
- There appears to have been some expected selling by investors on the Plc register (UK) which along with the influential iron ore price has weighed on BHP.
- However if the move goes ahead next year passive funds looking to hold exposure to the ASX will need to buy / hold more BHP potentially offsetting some of the Plc selling.
- There will be less franking credits available for off market buybacks but the stock’s yield moving forward will be largely determined by free cash flow and especially the price of iron ore over the next few years.
The reason for the planned move is simple, it will make BHP simpler and more agile with special attention being considered to its agreement to merge the BHP petroleum business with Woodside Petroleum (WPL) i.e. the times right to make a move which has been touted a few times over the last two decades.
Votes will be cast by shareholders on January 20th and assuming its passed we are likely to see unification occur on January 31st 2022 – that’s not long.
MM remains long and bullish BHP
Add To Hit List
