Tip Update BG Group PLC (uk:BG.)
Growth
Medium RISK
Our previous tip
- We said Buy
- When 5 Jan 2012
- Price 1,394p
- Tip performance to date -10%
A $1.3bn (£839m) write-down on its US shale gas interests due to a weaker outlook for US natural gas prices dented
Apart from the US setback, BG benefited from a strengthening price environment, particularly in Asia. This was reflected by strong revenue growth and a one-third increase in operating cashflows to $5.7bn. Adjusted operating profits, though 6 per cent up at $4.35bn, were held in check by rising production and depreciation costs.
Daily production was up by 4 per cent on the first half of 2011 to 671,000 barrels of oil equivalent (BOE), but the prolonged shutdown of the North Sea Elgin-Franklin gas field and deferral of the Jasmine field start-up are expected to reduce daily production by around 30,000 BOE to around 720,000 at the year-end.
The LNG business is booming, though; the division is expected to contribute operating profits at the upper end of the current $2.6-$2.8bn guidance. Prior to these figures, JPMorgan Cazenove anticipated group adjusted full-year 2012 EPS of 86.1p (2011: 83.5p).
| BG GROUP (BG.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,255p | MARKET VALUE: | £42.6bn | |
| TOUCH: | 1,254-1,255p | 12-MONTH HIGH: | 1,554p | LOW: 1,105p |
| DIVIDEND YIELD: | 0.8% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 884¢* | NET DEBT: | 34% | |
| Half-year to 30 Jun | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 9.91 | 3.69 | 54.3 | 6.63 |
| 2012 | 11.3 | 2.85 | 36.8 | 7.64 |
| % change | +15 | -23 | -32 | +15 |
|
Ex-div:01 Aug Payment:07 Sep £1 = $1.55 *Includes intanglible assets of $4.57bn, or 135¢ a share |
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SHARE TIP UPDATE:
BG's future growth projects in Brazil and Australia remain firmly on track, but the shares are 10 per cent adrift of our tip of the year call (1,394p, 5 Jan 2012) due to the sector wide pull-back which provides another us with buying opportunity. Buy.
Last Ic view: Buy, 1,487p, 10 Feb 2012
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