FMG (ASX) Fair Value For FMG

Originally posted by Superheat: ↑

Would someone much smarter than I am, please provide a guide on what the FV of FMG is at Iron Ore Prices of low ball $120. This would give me a base case scenario on the possible share price. I sold out at 25 as I have been expecting issues with iron ore due to internal issues in China. Now I wonder at what price I can buy back in as a long term hold for the dividend stream. Even at the worst case $80 that some analysts predict the long term price will be, FMG is making a ton of money. The 120 figure has no scientific backing, purely gut feel and happy to be corrected.

I have read analyst reports but they have been wrong on FMG and iron ore prices every step of the way for the last 2 years. I think astute Hotcopper posters would be better value.

As Vale comes back on stream, one would expect the days of nose bleed ore prices to be over. I am optimistic on the long term future of FMG as they transition to higher grades, as that would insulate them somewhat from falling iron ore prices.

Iron Ore is intrinsically linked to construction in China. As the government has tightened up on loose lending, this will invariably suffer. In addition steel output has been curbed to control pollution and I see that in escalating steel prices there. I deal with specialized steel products and get parts made in China.
These are just a few interesting snippets on the internal issues there.
Evergrande
This is the No. 2 property group and is deep in debt to the tune of $100 billion. The head Hui Ka Yan, once China's richest man is being hounded and has recently resigned from his post. They have 427 legal cases ongoing for various issues like non-payment etc.
Huarong
This is the largest of the 4 "Bad Banks" set up 20 years back to absorb the bad debts of banks so they could clean up their balance sheets. It is now deep in debt itself, with a massive loss for the year and a government bailout. The head, Lai Xiamin, was executed in January this year for financial crimes as he ran it like a private plaything.
Dalian Wanda
Wang Jianlin headed this empire. He was another superstar buying things around the world on easy money from his connections. Covid put an end to him as revenues from shopping centers, theaters etc crashed. Now he is deep in debt, on the nose and flogging stuff to stay afloat.

Expand

Add Jack Ma to the list of crumpled empire builders. As you'd know he started Amazon and now hasn't been reported to be seen for 9-10 months.

If you're serious about wanting to buy back into FMG, then I'd be carefully watching news on the Ex-divi date and the Record Date. The details haven't yet been released but there are two trains of projection on the FMG threads that ex-divi will be on 23rd Aug or 30th Aug.

I'll leave open your queries about fair value for someone with the right amount of knowledge to answer. Just to add it's calculated via formulae. Morning Star use the Star ratings which depend upon review of the criteria for the formulae. I'm not sure about this but I think the initial formulae were created at Stamford. Attached is a sheet from Morning Star showing how it applies the star ratings. 3-star is accepted as close to Fair Value.

MIN Morning Star explanation Star Ratings and Fair Value 12May21.pdf

Hope others can explain FV better - I'd really like to know more as I usually don't agree with MS's ratings.

No.	Vol.	Price($)
2	9247	$21.99

No.

Vol.

Price($)

9247

$21.99

Price($)	Vol.	No.
$22.00	3521	3

Price($)

Vol.

No.

$22.00

3521

No.	Vol.	Price($)
4	11765	21.970
2	5840	21.960
2	3604	21.950
3	12311	21.940
2	7071	21.930

No.

Vol.

Price($)

11765

21.970

5840

21.960

3604

21.950

12311

21.940

7071

21.930

Price($)	Vol.	No.
22.000	3521	3
22.010	280	1
22.020	1416	3
22.030	16800	3
22.040	13370	3

Price($)

Vol.

No.

22.000

3521

22.010

280

22.020

1416

22.030

16800

22.040

13370

(20min delay)
Last $22.00		Change 0.410(1.90%)		Mkt cap ! $67.73B

Open	High	Low	Value	Volume
$21.93	$22.09	$21.58	$138.1M	6.316M

Fair Value For FMG, page-4

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