Newspaper article The Journal (Newcastle, England)

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Newspaper article The Journal (Newcastle, England)

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Article excerpt

Byline: By Andrew J Miller, Gerrard

Bhp Billiton - The persistent strength in the oil price and the surge in coal and iron ore contract prices have prompted us to reassess our forecasts.

This has led to increases of approximately 20 and 33pc to earnings per share for 2004 and 2005. We continue to expect BHP Billiton to expand its profit and cash margins, as well as mitigate the impact of rising industry costs better than its peers, as it did throughout 2003. Indeed, cash flow continues to strengthen, covering capital expenditure, whilst net debt is falling. Development projects in the pipeline should raise production and sales, and we highlight the important commissioning of the Mad Dog and Angostura oil- fields by the end of 2004 as key for the petroleum division. We expect further benefits from higher base metal prices, steadily rising Chinese demand, positive contract pricing and the expectation of a further weakening in the Australian dollar to start to flow through more strongly. In our opinion, BHP Billiton is the best placed to benefit from these factors. Earnings upgrades have resulted in BHP Billiton's 2005 price-earnings ratio coming back to 15.2 times, which is a slight discount to its peer group. With superior earnings and dividend growth over the next few years, such a relative valuation appears unjustified and we expect the share price to continue its sector outperformance.

HSBC - HSBC is a global banking group. Its heartland has traditionally been Hong Kong and the Asia-Pacific region, but it now also spans the UK, Europe and the Americas. Indeed, it has spent around $46 billion on acquisitions in the US and Europe alone in the past five years. HSBC is a leading player in the UK following its purchase of Midland Bank and in France following the acquisition of France's CCF in July 2000. HSBC bought Safra and Republic Bank of New York, which took the group into the North American private banking market; this has been extended in 2003 by the takeover of Household International, the US consumer credit group. …

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