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FMG Feb 2022 Div Guesses, page-60

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OwenPlace

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05/02/22

01:40

Post #: 59372729
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Originally posted by MegaA: ↑

O

After my 2nd attempt at estimating the dividend I welcomed feedback and any constructive criticism. Iryni rightly pointed out that I could easily find the price of 58% IO and use that as a comparison rather than using 62%. I believe this is a far better methodology as using 62% as a base to estimate dividends and revenue is flawed due to high fluctuating grade discounts. I'm going to use a similar methodology than the last two times ive tried this and that is to try and estimate using last years half year as a comparison except this time using 58% IO instead. Here goes...

To begin lets try and get the average revenue of 58% Iron ore price over the half year.

First quarter 58% IO revenue was $118 per ton by 60.8 million tones (as per q1 report 28.10.22) this equates to = $7175.4 m total

2nd quarter was $74.36. for 57.2 million tons for a total of 4253.4

Adding the two figures together we get a total of $11428.8 divisible by 118 (the amount of total tones over the half year) we get $96.85 as our average price per tone realized over the half year.

This illustrates the importance of comparing like for like as the first example I used a couple of week ago, although not intentional could be seen as misleading. By comparing 62% IO we got a higher comparative price to a year ago however even though 62% was fetching higher prices, 58% was discounted to the point where revenue was lower than the 2021 half year. The comparison is - $96.85 this year vs last years half year of $114 per ton - nevertheless a healthy figure of 85% of last years figure for half year revenue.

Other considerations is that the c1 cost has increased by around $2.4 however this is offset by production/sales which has also increased by 3% therefore I'm happy to use 85 % for the comparison. I could micro analyze further however I believe this methodology should give us a satisfactory estimate.

85 % of $1.47 (being last years pay out ) is $1.25

So there you have it - that's my final guess - $1.25. Not the mouth watering estimate I initially posted however I believe a far more reliable figure (which is a example of why its important to do your own research, my initial guess was way off this one, for all I know I could of used a very flawed method this time around and be way off again) . If it is around the $1.25 mark I think that's a figure that will satisfy all investors, if you were to buy at todays prices you would be receiving a return of 5.85 % on this dividend payment alone, even if it peaks at 25$ and you were to buy then $1.25 would see a 5% return on this single payment. This dividend payment will see FMG return more than what most ASX companies return to their investors in a year and some even in 2 years. I feel the more often that FMG can prove themselves with high dividend returns then the more momentum and interest this stock will get. Some people were doubting that high dividends were permanent but if "the good paying dividend is only temporary " theory can be disproven then I feel we are in for ever increasing gains as this could lead to a increase in share price by seeing a substantial increase in long term holders, less people willing to sell their high paying stocks and outsiders wanting to get in for their piece of the pie in what is one of the ASX most fair, transparent, well run and rewarding companies.

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FYI
Ore mined H1 118 Million Tonnes.a
Q1 Ore mined 60.8 mt
Q2 Ore mined 57.2 mt

Ore shipped H1 93.1 Million Tonnes
Q1 Ore shipped 45.6 mt @ US$118 pt
Q2 Ore shipped 47.5 mt @ US$74.36 pt

Estimated dividend range $1.07 - $1.17

It may be time to consider when looking forward, likely FMG may decide to reduce its future dividend payouts in order to fund an increase in all types of FFI expenditure.

Looking forward to a clearer direction from the board in the Half Year presentation.

FMG Price at posting: $21.34 Sentiment: None Disclosure: Held
10 Upvote

2 Great analysis

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FMG Feb 2022 Div Guesses, page-60

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