"FMG started the last half with $8,392 Million of equity"
I see 8406 on page 13 of the last half yearly, but yep, close enough.
"In that half they earned $1,222 Million Net profit"
Yep.
"$1,222 Million is 14.5% return on $8,392 Million in 6 months, which is a 29% return on an annualised basis. [Yep] (Unless you think FMG only operate their mines for 6 months of the year) "
Of course not, but I don't want to rely on a projection without recognizing it as a projection.
"Also keep in mind the average IO price this half is higher than last half, so even if IO remains at a lower level for the rest of the half, they should be able to match the first half results,"
I am keeping that in mind, but also keeping the margin in mind which is determined not just by the average io price but also by their realized price. In the last quarter their margin I recall was slightly better than their margin in the first half so your projection holds for three quarters of the year.
But what is unusual in my experience was the recent quarterly report which I imagine Nev Power must have at least read before going out that had a lower possible realization bounds of 75per cent. Couple 75 per cent realised with an io price of 60 (also a figure Nev has used and that 60 is not worst case) and the last quarter of this year will not be as good as the first three quarters.
And next year *might* so far as I know, and I don't claim to know, see a prolonged period where the io price is around 50 to 55 a ton.
If that price is combined with a realization of only 75 per cent then that will reduce the NPAT next time financials are reported. And the market will react, probably, predictably even, over-react to that.
I don't really have a problem with your reasoning, so far as I follow it, for someone that has a buy and hold long term approach. Sooner or later the market will discover the value of assets if it forgets for a period.
But I do personally doubt that buy and hold (applied to a single commodity company like FMG, that if commodities cycle - and I think they do - must go out of cycle) is the best an analytical person can do. Surely some timing of the market should be possible for some people.
I don't doubt buy and hold (FMG) would do better than bank interest which seems to be a fairly low standard you set to beat.
Sorry for the long winded post. I wasn't picking on you, I respect you and was sort of thinking out loud.
Expand
(20min delay)