Berenberg downgrades 'big fella' BHP from 'buy' to 'hold'

Analysts at Berenberg downgraded mining giant BHP from 'buy' to 'hold' on Monday, stating "the big fella" was lacking near-term catalysts.

Berenberg said BHP had elected to unify its dual-listed structure, or DLC, as part of an effort to simplify the business, with the primary listing of the stock set to move to Australia only, resulting in the primary London listing moving to a secondary listing and, in turn, the shares moving to the standard segment of the LSE.

The German bank, which cut its target price on the stock from 2,700.0p to 2,200.0p, thinks this will result in index funds, which make up roughly 14-15% of the PLC register, being unable to hold the shares due to BHP dropping out of the FTSE 100 and will also leave some shareholders whose mandates are to own UK stocks with a UK domicile unable to own the shares.

"While this will provide a forced flowback of shares to Australia, we believe that the resultant up-weight within the ASX (from the PLC market cap of circa $41.0bn transferring over) will create net demand of circa 106.0m shares, or circa $2.7bn. We also expect the current arbitrage between the London and Sydney lines (7.6%) to drive outperformance for the shares in H1/CY22," said Berenberg.

However, Berenberg stated that for now, it believes the stock lacks near-term catalysts and prefers exposure to Anglo American.