General | Feb 05 2006
BHP Billiton (BHP) and Rio Tinto (RIO) are not expensive on most measures, Vicky Binns and her team of mining analysts at Merrill Lynch say, while lifting their targets on the two stocks by a whopping 30% and 19% respectively.
Both companies have strong margins and returns, the analysts point out, as well as under geared balance sheets and “growing free cashflow yields.”
Merrill Lynch also sees both as trading at “significant” and “unwarranted” discounts to the market.
The broker also sees the likelihood of “continued earnings upside momentum” with spot prices remaining above their forecasts.
Merrills now has a target of $35 on BHP and $95 on RIO.
In answer to which one investors should choose, the analysts are quite clear: “don’t choose, buy both.”
