February 15, 2011 / 1:04 PM / 7 years ago

BHP Billiton investors pin hopes on expanded share buyback

   * Consensus points to H1 attributable profit of $10.3 bln
 * BHP can return $10 bln-$25 bln via shr buyback/special
 * BHP may be interested in an oil and gas company
 * Shares up 9 percent in 2 weeks
 By Sonali Paul
 MELBOURNE, Feb 16 (Reuters) - Top global miner BHP Billiton (BHP.AX) is expected to nearly double its first-half profit to a record, with investors focused on its strategy for its bulging cash pile as iron ore, copper and oil prices soar.
 Shareholders have been clamouring for the company to expand its ongoing $4.2 billion share buyback, with only a quarter of that completed so far, after it faltered on three major deals over the past three years.
 BHP remains undaunted in its takeover ambitions, despite having been forced to ditch its $39 billion bid for top global fertiliser maker Potash Corp POT.TO, an iron ore joint venture with Rio Tinto (RIO.AX) (RIO.L) and a full takeover of Rio Tinto in the face of government and regulatory resistance.
 So BHP may look to preserve cash as it looks to pounce on an oil and gas target, with speculation that it would be interested in Anadarko Petroleum (APC.N), Apache Petroleum (APA.N) or Woodside Petroleum (WPL.AX). [ID:nL3E6NV01K]
 Even with acquisitions and plans to spend $15 billion a year on projects, BHP has the capacity to return anywhere between $10 billion and $25 billion to shareholders through share buybacks or special dividends, analysts estimate.
 On Tuesday, speculation centred around $10 billion.
 "They've got the capacity. It's whether that's what they want to do," said James Bruce, portfolio manager at Perpetual Investments, one of BHP's top ten Australian shareholders.
 BHP is expected to report attributable profit before one-offs of $10.3 billion for July-December, based on an average of 14 analysts' forecasts, up from $5.7 billion a year ago.
 That would follow Rio Tinto's bumper second-half profit of $8.22 billion last week and a promise to return $5 billion to shareholders over the next two years, starting off with an on-market buyback of its UK listed shares. [ID:nL3E7DA0K8]
 For StarMine comparative data:
 BHP's shares are considered cheap at the moment, trading on a forward earnings multiple of just 11.9 even after a 9 percent share price rally to a near 33-month high ahead of the results.
 "We think that BHP is attractively priced for investors," Bruce said.
 BHP shares closed up 0.2 percent at A$47.36 ahead of the results announcement, due before the Australian market opens on Wednesday.
 Australian fund managers looking for an off-market buyback of BHP's Australian shares are the least likely to get their way, as it makes more sense for BHP to buy back its UK listed shares, which are cheaper, on market.
 Analysts expect a dividend of around 49 cents a share, up from 42 cents a year ago.
 Smaller rival Xstrata XTA.L set the pace last week topping forecasts with an 86 percent jump in full-year profit and a dividend that was nearly double market expectations.  (Editing by Anshuman Daga) 

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