rbs australia - $50.37 , page-3

Please find below updated AspectHuntley's recommendation for BHP as at 18 Dec 09.

Huntley's Recommendation: BHP Billiton Limited

Recommendation: Buy

Key from BHP's perspective are higher copper and iron ore price forecasts. Long term iron ore prices rise 26% to US$50/tonne and copper prices 25% to US$2.50/lb. BHP leverage pips RIO marginally given its lower aluminium exposure - for which we left prices unchanged - and its coking coal exposure which RIO lacks. We raised the long term coking coal price by 20% to US$120/tonne. Iron ore, copper and coking coal are three leading ingredients for developing world growth via urbanisation led by China. Our valuation and earnings forecasts for BHP increase substantially.

Business Impact: We increase our BHP valuation 17% to $50.80ps and upgrade our recommendation from Accumulate to Buy. Our FY10 and FY11 earnings forecasts increase 25% and 35% to $2.47ps and $3.06ps respectively. Our preference remains for the diversified resource majors for metals and bulks exposure. We think BHP remains the clear winner from a business quality perspective, but RIO outshines from a valuation perspective. At a price of $70.80ps, RIO trades at a 30% discount to valuation versus 19% for BHP at $41.05ps.

E*TRADE Broker consensus estimates are 2 strong buy, 1 moderate buy and 2 hold.

Brokers:
> Austock Securities Ltd
> E.L.& C.Baillieu Stockbroking
> Intersuisse Ltd
> Morningstar Australasia
> Ord Minnett