Key points
- BHP is working to unite its global listings by fusing its Australian and London entities
- The BHP London share price has significantly outperformed its Australian counterpart recently, but BHP's ASX stock has the long-term lead.
- The differing performances could be explained by currency fluctuations and franking credits
Those interested in the BHP Group Ltd (ASX: BHP) share price will likely be aware of the company's plan to fuse with its London-listed counterpart BHP Group PLC (LON: BHP).
Currently, BHP is run as 2 separate companies with different legal structures and share registries.
As part of its unification, shareholders of BHP Plc will have their holdings swapped for BHP Ltd shares.
However, some might be surprised to learn the BHP London share price has outperformed that of its Australian counterpart recently.
Let's take a closer look at which side of the company has been delivering greater returns for shareholders.
Why has the BHP London share price outperformed its ASX counterpart?
The BHP share price had a shocking year on the ASX in 2021. It fell 2% over the 12 months ended 31 December.
Meanwhile, the BHP London share price gained 14% last year.
Though, ASX investors will be happy to know BHP's Australian listing has outperformed over the last 5 years.
Its shares' value increased 77% over that period, while BHP Plc's shares gained 65%.
For context, the S&P/ASX 200 Index (ASX: XJO) gained 13% in 2021 and 30% over the last 5 years.
According to WaveStone Capital senior investment analyst Duncan Simmonds, the differences in the stocks' performance is likely due to currency fluctuations and franking credits.
Simmonds told Livewire the value of the United States dollar over both the British pound and the Australian dollar impacts expectations of BHP's future cash flows, as the company reports in US dollars.
Additionally, while the two entities' shareholders receive identical dividends, franking credits are only available for Australian tax residents. Simmonds stated:
Assuming 50% of the Ltd shareholders value the franking credits and using consensus dividend estimates, we estimate the premium for Ltd over Plc should be around 15-16%.
According to BHP, the unification of its London and Australian entities is expected to go ahead later this month. No doubt, many will be watching the BHP share price in the meantime and – if all goes to plan – in its wake.
