FMG

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$18.75 fortescue ltd

Hi I am surprised people still listen to these so called broker...

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29/10/14

12:23

Post #: 14200079
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Originally posted by rcman ↑

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.

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Hi
I am surprised people still listen to these so called broker experts. I remember not so long back for example, BCI had a strong buy with just about all brokers, when it was over $5, what it is now less than $1.20. On my valuation for FMG I have a bearish target between $1 and $2. So I think FMG is overvalued and probably a good short the rallies. Cheers.

FMG Price at posting: $3.44 Sentiment: Sell Disclosure: Not Held
4 Upvote

0 Great analysis

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(20min delay)
Last $18.75		Change -0.240(1.26%)		Mkt cap ! $57.73B

Open	High	Low	Value	Volume
$18.53	$18.75	$18.44	$216.3M	11.60M

Buyers (Bids)

No.	Vol.	Price($)
1	1990	$18.75

Sellers (Offers)

Price($)	Vol.	No.
$18.76	47022	3

View Market Depth

No.	Vol.	Price($)
1	1990	18.750
1	160	18.700
1	700	18.680
4	4019	18.660
7	8200	18.650

Price($)	Vol.	No.
18.760	47022	3
18.780	1700	2
18.790	41681	1
18.800	18123	4
18.820	53827	2

Last trade - 16.10pm 02/08/2024 (20 minute delay)

FMG (ASX) Chart

Hi I am surprised people still listen to these so called broker...

Uranium prices on the NYMEX are stable, but ASX uranium stocks are sinking on Friday. The answer lies in Kazakhstan

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Commodity house Trafigura funds Develop Global's copper-zinc Woodlawn play with offtake deal in place

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Week 31 Wrap: JORC rules to get tougher; RBA rate hike chance 50/50; US Fed Sept cut still the quo

Cost blow-out for Rook I uranium project sees share plummet for NexGen

GreenX picks up prospective copper project in Germany

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Hi I am surprised people still listen to these so called broker...

Top Stories

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Vmoto sales plummet -50% YoY as weak demand in Europe & China stifles EV scooter sales growth

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Week 31 Wrap: JORC rules to get tougher; RBA rate hike chance 50/50; US Fed Sept cut still the quo

Cost blow-out for Rook I uranium project sees share plummet for NexGen

GreenX picks up prospective copper project in Germany

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Sellers (Offers)

Featured News