Oct 29, 2014
Site visit points to “bankable” 171mt in FY17: Last week’s FMG site visit highlighted a no-capex pathway to a potential 180mtpa output. Rail and port capacity will be at this level by mid CY15. We have assumed 171mt production in FY17 post the start-up of the Solomon detritals plant plus 5mtpa of additional DSO at Chichesters. We stick with our US$30-$31/t cash costs to be conservative but note FMG is targeting cash costs in the mid $20s/tonne range. Higher volume assumptions see our FY15 EPS revised up 4% and FY16-17 EPS up 10%.
■ Valuation metrics compelling: In FY16 we use $80/t China fines pricing and FMG can still generate $1bn off our $30/t cash costs. And with capex at$1.2bn, debt can still be reduced by ~$700m. Even at this earnings and FE price low, FMG trades on FY16 PE of 8.6x, price/cash earnings of 3.9x and FCF yield of ~11% at an EBIT margin of $11/t. Our DCF SOTP is A$6.5/sh.
■ Stress test also supportive: Running $85/t in perpetuity through our models with no change in costs gets a DCF in line with the share price for a steady state EBIT margin of $13/t. At $5/t lower costs, the share price solves for $80/t iron ore. The good news is that at $13/t margin, FMG can still reduce debt and is trading on prospective P/Es at 6-7x and cash P/Es at ~3.5x. At the lower costs, the EBIT break-even Fe price is $72/tonne. Every $4/t increase in the assumed Fe price adds A$1/sh to the DCF.
■ Maintain OUTPERFORM and target price of $5.00. FMG’s shares are down 24% in the last three months, underperforming iron ore peer Rio Tinto by 16%. On a 12-month view, FMG has underperformed Rio by a hefty 28%. Value is apparent and we think our stress-testing points to an attractive risk-reward opportunity.
- Forums
- ASX - By Stock
- FMG
- From Credit Suisse
From Credit Suisse
-
- There are more pages in this discussion • 13 more messages in this thread...
You’re viewing a single post only. To view the entire thread just sign in or Join Now (FREE)
Featured News
Add FMG (ASX) to my watchlist
(20min delay)
|
|||||
Last
$21.86 |
Change
0.040(0.18%) |
Mkt cap ! $67.25B |
Open | High | Low | Value | Volume |
$22.18 | $22.18 | $21.69 | $118.6M | 5.417M |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
4 | 19498 | $21.85 |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
$21.86 | 32672 | 5 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
4 | 19498 | 21.850 |
4 | 67850 | 21.840 |
4 | 38517 | 21.830 |
2 | 3705 | 21.820 |
4 | 41022 | 21.810 |
Price($) | Vol. | No. |
---|---|---|
21.860 | 32672 | 5 |
21.870 | 37321 | 3 |
21.880 | 78534 | 6 |
21.890 | 13118 | 37 |
21.900 | 76712 | 10 |
Last trade - 16.10pm 09/07/2024 (20 minute delay) ? |
Featured News
FMG (ASX) Chart |