fmg over valued, page-61

Ive been bearish on FMG from their lows, and been proven wrong, i thought interest would sink them, but it doesnt look like it will happen now.

There are downside risks, when the next bear market happens (there is always another one coming, just a question of when) prices inevitably drop to the marginal producer, all this cost cutting means the marginal price is a lot lower, the IO price will likely drop lower than this most recent event.

But FMGs volumes are probably too significant for it to fail completely now, prices wouldnt drop to below FMG's cost because the prospect of FMG halting their production would drive prices back up. Well, unless things got really really ugly.

At the end of the day the problem for FMG is that their fate depends on others, FMG has smaller profit margins than the other majors and still has a more vulnerable balance sheet. If the others wanted to they could make life very miserable for FMG.

Morningstar didnt change their $1.60 fair value estimate on FMG following these results. They expect average IO price of $35 to 2020.