In response to comments on which is better value RTA or FMS consider the following:
1. The Rail and Port needs PIOP to start - hence the alliance agreement
2. PIOP needs the Rail and Port to start - hence the alliance agreement
3. FMS and RTA/Todd therefore sink or swim together - it is a symbotic relationship...
4. The Alliance agreement, as shown on a previous presentation, shares the iron ore value - the basic terms are:
- a $20/t access fee
- direct rail and port opex costs paid by user (FMS)
- RTA/Todd receives a price participation of 30% of revenue above Australian $60/t on the price received by FMS
If you take the Edison prices and exchange rates, FMS would receive from a Chinese buyer ~A$90/t CFR.
Therefore FMS revenue would be A$81 (60+21), costs would be A$66.5 (A$46.5 as per RTA presentation + $20 access fee), giving a operating margin of A$14.5/t, or A$362m per annum (based on 25mtpa). No capex numbers published by FMS (anyone?).
RTA/Todd revenue would be A$29/t ($20 access charge + $9 price participation) and direct costs would be say $2/t admin as most direct costs cover by FMS as per agreement, giving an operating margin of A$27/t or A$650m per annum (based on 25mtpa), on a capex of A$2bn which is approx 3 year payback.
RTA/Todd have a higher operating margin at the Edison numbers which once debt is paid down would be more valuable.
Finally RTA have 68% of this giving RTA a margin of above A$16/t (still more than FMS) - and RTA has a market cap of A$22m vs FMS of $52m
FMS have hard tonnes in the ground...
RTA/Todd have spare capacity of 20mtpa...
As I said at the start both companies will either be successful or neither will be, but based on the alliance value split RTA need to increase two and half times before the alliance agreement value share vs market cap equalise IMHO...
FMS Price at posting:
1.9¢ Sentiment: Buy Disclosure: Not Held
RTA Price at posting:
18.0¢ Sentiment: Buy Disclosure: Held
