{ "docId": "019dd923-622c-750b-8b9c-5b8ee881ff95", "docSlug": "6f0a3b154a08", "documentTitle": "BHP Billiton (BHP)", "authorId": "02_Elliott_Management", "authorName": "Elliott", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "activist_investor", "sourceTypeLabel": "Activist investor", "presentationDate": "2017-04-10 00:00:00", "orientation": "landscape", "aspectRatio": 1.4444444, "pageNumber": 15, "pageCount": 39, "prevPage": 14, "nextPage": 16, "slideType": "problem_statement", "function": "diagnose_problem", "density": "overcrowded", "nDataPoints": 16, "notes": "The chart shows a dual-axis combination of bar (balance) and line (percentage of equity).", "elementsJson": [ "headline_text", "bar_chart_vertical", "line_chart", "bullet_list", "callout_box", "footnote" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b9c-5b8ee881ff95/15", "deckHref": "/decks/019dd923-622c-750b-8b9c-5b8ee881ff95", "deckJsonHref": "/decks/019dd923-622c-750b-8b9c-5b8ee881ff95.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b9c-5b8ee881ff95#slide-15", "components": [ { "bbox": { "h": 0.08, "w": 0.9, "x": 0.05, "y": 0.85 }, "kind": "callout", "text": "The Value Unlock Plan could lead to a release of up to c.US$13.9bn of franking credits by Year 5 through value-accretive discounted off-market buybacks for the benefit of all BHP shareholders(1)", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "a8326f52-1027-4392-9ce4-fd4855783efb", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "callout", "text": "The Value Unlock Plan could lead to a release of up to c.US$13.9bn of franking credits by Year 5 through value-accretive discounted off-market buybacks for the benefit of all BHP shareholders", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-0f1a-773e-97e0-36a681810360", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.6, "w": 0.45, "x": 0.05, "y": 0.2 }, "kind": "chart", "text": "Franking credit balance", "attrs": null, "subkind": "bar-vertical", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "748d4ec3-4ebc-407a-bda7-7fcab6a810b7", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.45, "x": 0.52, "y": 0.6 }, "kind": "list", "text": "BHP's massive franking credit balance does not appear to be appropriately valued by the market, in the absence of a clear path to monetizing the franking credits for shareholders.", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "12b6ebc4-2f27-4b00-ba04-4af76a4353ce", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.45, "x": 0.52, "y": 0.45 }, "kind": "list", "text": "Our analysis indicates that the reduction in BHP's franking credit balance recorded in 2015 was largely a result of BHP's prior, and now-abandoned, policy of paying \"progressive dividends\", which required the payout of significantly more in dividends than BHP achieved in profits that year.", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "14d4d6d1-743a-4f58-881b-b7de82887da0", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.45, "x": 0.52, "y": 0.68 }, "kind": "list", "text": "We estimate that BHP's franking credit balance could reach over US$17bn by 2022 (assuming the current 50% payout ratio continues without further usage of the Dividend Share Mechanism).", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "5163a697-925a-43d9-bf2c-39283a8e13f7", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.45, "x": 0.52, "y": 0.76 }, "kind": "list", "text": "Due to the lack of earnings independently generated by Plc, any meaningful dividend distribution significantly beyond the current 50% payout ratio under the current DLC structure may require BHP to utilize the Dividend Share Mechanism which could result in further wastage of franking credits.", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "c2909666-3de5-437a-b87e-02173119dfb9", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.25, "w": 0.45, "x": 0.52, "y": 0.15 }, "kind": "list", "text": "There has been a build-up of franking credits at Ltd due to the misalignment of profits vs. shareholder base in the DLC structure. The reported franking credit balance in 2016 was US$9.7bn, or c.10% of BHP's total market capitalization.", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "c8bd2de6-d048-4bd5-bc63-a071f9bc2d9a", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.25, "w": 0.45, "x": 0.52, "y": 0.25 }, "kind": "list", "text": "Under the current BHP structure, we consider the vast majority of this value to be stranded. As an illustration, we estimate that the dividends declared as part of the half year ended 31 December 2016 results will release less than US$600m of franking credits, compared to the c.US$853m of franking credits that we estimate are likely to have been effectively wasted due to the US$1,990m dividend paid to Plc through the Dividend Share Mechanism in March 2016.", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "dcda1a15-acee-4a31-bd08-e821d923b989", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "metric", "text": "Franking credit balance: US$9.7bn", "attrs": null, "subkind": "primary", "toolName": "Quantification", "toolSlug": "quantification", "confidence": null, "componentId": "019dd953-0f1a-773e-97e0-3873c8f8b8c6", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.1, "w": 0.9, "x": 0.05, "y": 0.05 }, "kind": "title", "text": "Accumulated franking credits remain unutilized - a remarkable value unlock opportunity", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "bad75554-0b3c-4cbc-9276-800c80a74cc6", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [ { "to": 26, "from": 12, "beatId": "25288d96-a011-466d-9ef3-2ecba26c72c9", "arcName": "The Consultant's Gambit", "arcSlug": "consultants-gambit", "beatName": "Solution & Approach", "beatSlug": "consultants-gambit-solution-approach", "evidence": "The document proposes a three-step solution to unlock shareholder value and provides evidence and precedents to support the proposal.", "position": 2, "confidence": 0.8, "parentBeatName": "Turn", "parentBeatSlug": "turn" } ], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }