"$7.50 here we come. Just Relax......" Well I missed by 0.5 cents, that's it, no more next trading day predictions from me.
Most of us are sitting on 50%+ profit and with all the news happened on the weekend: Shipping Data, RIO, Vale, etc, you don't have to be a genius to see SP is up another 4.5% today, just RELAX people, nothing has changed to alter FMG's momentum, yet!
IOP will stay in the high 80s / low 90s for a while, Supply and Demand, it's going to hold up the IOP.
Here are my March Q estimates:
- Platts 62% Benchmark US$82.70/dmt (factual)
- Moisture 8.5% (estimate)
- Shipment 41.7MT (estimate)
- Capital Expenditure US$3.5/wmt (estimate)
- Total Cost Incl. Interest is US$31/wmt (estimate)
- Discount is one of the most difficult number to work out, due to spot and forward contracts, it's really a "guesswork":
Contracts:
- Jan: PB 29%; SSF 40%; Overall (29% x 0.6 + 40% x 0.4) = 33%
- Feb: PB 22%; SSF 33%; Overall (22% x 0.6 + 33% x 0.4) = 26%
- March: PB 7%; SSF 16%; Overall (7% x 0.6 + 16% x 0.4) = 11%
Overall Discount is 23%
Spot Market:
- Jan: SSF average increased from 348 yuan in Dec Average to 395 yuan in January Average;
- Feb: SSF average increased from 395 yuan in Jan Average to 506 yuan in February Average;
- March: SSF average increased from 506 yuan in Feb Average to 519 yuan in March Average;
- PB on average is 60 yuan more than SSF.
My estimate in March Q, at Spot: PB is 13% and SSF is 24%, so overall discount is 17.4%
Combine the 2 discount, My Estimate overall discount for March Q is 20%.
March Q Cash Flow: ((US$82.7 x 0.8 (discount) x 0.915 (moisture)) - US$31 (Operating Cost)) x 41.7MT = US$1232M
Other Expenses:
- Capital Expenditure + Exploration + Development ~US$300M
- Dividend ~US$650M
- Prepayment ~US$100M
Cash at Bank ~US$1150M
The MOST important numbers for the March Q Report are "Discount" and "IO Shipped". The Market basically just look at these 2 numbers as other numbers are pretty consistent. If FMG can demonstrate discount has narrowed from 33% to 20% and currently running at 10% for June Q, we should see Full Year NPAT of over US$2500M.
This should give FMG a valuation around $9. Of course this will change with Discount and IOP.
Once again, just RELAX!
DYOR
Frank
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GLTAH
(20min delay)