FMG - Fortescue Ltd

[qldfrog]

Agree for the overall figures but i expect a serious hit to profit and price when the data for chinese business ssand imports in the first2029 quarter are released.
China remains closed

 

[Value Collector]

Agree for the overall figures but i expect a serious hit to profit and price when the data for chinese business ssand imports in the first2029 quarter are released.
China remains closed

The Iron Ore price is still above $80, last years wonderful result was achieved with an average price of $80.

not to mention that the 1st half result due to be reported had a much higher price.

Also, some Chinese Iron Ore mines have been closed due to corona, so local production is down.

All in all I am not worried, we have some big figures due to be reported and Corona panic will come and go soon.

 

[Value Collector]

First Go Twiggy...Love a guy who is willing to risk a fortune to make a larger fortune and give me opportunity to make money with him....

Here is my take on what could happen in the future for FMG but we must first remember why the price was so low. When the price was less than $2/share investors (me) were/was worried that another entity would purchase FMG and I would not realize any return and more than likely a loss. The concern was attributed to the price of Iron Ore being low and the projected price of iron ore in the future was going down instead of up. So the market price for iron ore from 2015 - 2020 was projected to be $35/wmt-$45/wmt. FMG was producing in the high twenties as I remember. So the difference did not allow FMG to make their debt payment when they came due. This caused them to push the debt out further. This allowed the price to recover a bit. Then FMG dropped their cost of producing the ore to the high teens. This raised the price/share to the $3 dollar range as there was less of a chance to go bankrupt but they still weren't making a bunch of money. But over the last five years, the price of iron ore especially in 2019 was way above what was prognosticated and the cost of production was further reduced in 2018 to the low teens. This allowed FMG to pay down the debt...heck at one time it was about $9B now FMG publishes their net debt as $0.7B.

So the question is do you trust Twiggy to use the profits generated in the future to help FMG grow or at least be distributed to the ownership. I think FMG paid out a little over a $1 in dividend payments in 2019 and paid down a bunch of debt. Since the debt is going to be gone, if he decided to payout $2 in dividend payments what would the price be with no debt and little risk of forced sale of the company. I think that it is too early to get out of this stock as the future appears to be very bright. I wouldn't be surprised if we see a 15%-20% return each year for the next 5 years with very little down side risk. This obviously is not a 500% gain over the next 5 years but in my book an excellent investment.

Fmg are definitely using their capital wisely.

They cleared the debt down to a low level (gross debt will probably now sit at this level).

Now they are paying very solid dividends, while making wise incremental growth investments E.g. the expansion into magnitite, and exploration in other areas.

I think it’s great Fmg is using exploration as their primary growth model, to many other miners have rushed into big take overs in the good times and later regretted them.

if Fmg does do a big acquisition in the future I have no doubt it will be well calculated and not an impulse.

 

[Value Collector]

Another solid dividend from FMG today 76 cents,

If you got in at $2, that is an annualised dividend yield return of over 100% including the franking credit.

or a 19% dividend yield based on todays share price (including franking), 13.4% excluding the franking.

I am very happy collector.

 

[CBerg]

Another solid dividend from FMG today 76 cents,

If you got in at $2, that is an annualised dividend yield return of over 100% including the franking credit.

or a 19% dividend yield based on todays share price (including franking), 13.4% excluding the franking.

I am very happy collector.

Well done mate, what a monstrous dividend!

 

[SirRumpole]

You sure can pick em VC. What's your next tip ?

 

[joeno]

Another solid dividend from FMG today 76 cents,

If you got in at $2, that is an annualised dividend yield return of over 100% including the franking credit.

or a 19% dividend yield based on todays share price (including franking), 13.4% excluding the franking.

I am very happy collector.

Yes i followed VC's advice as well as doing personal DD and picked this up sub-$2. One of the better choices i've made in life

I'm wondering what was your basis for thinking FMG would grow so much. Financials? Perspective on management?

 

[qldfrog]

Yes i followed VC's advice as well as doing personal DD and picked this up sub-$2. One of the better choices i've made in life

I'm wondering what was your basis for thinking FMG would grow so much. Financials? Perspective on management?

Past history

 

[Value Collector]

I'm wondering what was your basis for thinking FMG would grow so much. Financials? Perspective on management?

Basically it just came down to an assessment of it’s likely earning power over time which is a function of

1, where I thought Iron Ore price would settle at.

2, What it would cost them to produce and ship each tonne.

3, How many tonnes they can ship per year.

The market made a couple of big mistakes,

1, They were valuing Fmg as if they were a high cost producer, which they were at the time, but only because They were in the process of ramping up production and opening new mines feeling their way, I believed there was nothing magic about BHP and RIO, and that Fmg would eventually have their cost per tonne drop to the level of BHP.

2, The market was valuing FMG on the basis of IRON ORE staying below $40 per tonne forever, given the cost curve and the amount of production around the world above that level, I didn’t see it as being sustainable to have Iron ore prices that low, so I knew they would rise eventually.

3, given their opinions above, the market thought FMG would either fail due to their debt, or become a debt zombie only being able to pay interest and never making a decent return on equity, I believed the opposite, I knew once the cashflow started to rise as the cost per tonne dropped and the iron ore price lifted they would be able to smash the debt and eventually pay large dividends, which they are now doing.

 

[fiftyeight]

My biggest winner by far recently has been FMG. But having some doubts over the medium term.

Vale takes a hit due to announcing

Basically it just came down to an assessment of it’s likely earning power over time which is a function of

1, where I thought Iron Ore price would settle at.

2, What it would cost them to produce and ship each tonne.

3, How many tonnes they can ship per year.

The market made a couple of big mistakes,

1, They were valuing Fmg as if they were a high cost producer, which they were at the time, but only because They were in the process of ramping up production and opening new mines feeling their way, I believed there was nothing magic about BHP and RIO, and that Fmg would eventually have their cost per tonne drop to the level of BHP.

2, The market was valuing FMG on the basis of IRON ORE staying below $40 per tonne forever, given the cost curve and the amount of production around the world above that level, I didn’t see it as being sustainable to have Iron ore prices that low, so I knew they would rise eventually.

3, given their opinions above, the market thought FMG would either fail due to their debt, or become a debt zombie only being able to pay interest and never making a decent return on equity, I believed the opposite, I knew once the cashflow started to rise as the cost per tonne dropped and the iron ore price lifted they would be able to smash the debt and eventually pay large dividends, which they are now doing.

Surely there is some medium term pain on point 3).

Vale have made announcements on possible reduction in exports and covid-19 is yet to play out here.

If either FMG or the ports have to scale back operations, FMG will take a hit in the medium term. FIFO camps will have issues and so will the remote towns servicing the industry.

All ifs and maybes, but does not seem to factored in yet

https://www.theguardian.com/comment...he-frontline-of-the-coronavirus-health-crisis

 

[Value Collector]

Surely there is some medium term pain on point 3).

Well at the moment shipments are up, price is high in US dollars, and the Aussie dollar super low, so we are printing money at the moment.

But sure, there could be disruptions or slowed production at some point in the future, but I don't see that as being any sort of long term blow, surely nothing that justifies a PE of less than 5.

I would think FMG's share price is so low compared to their current earnings, that all sorts of factors are already priced in.

I mean they could completely shut down for 3 months and still have a PE of less than 10 for the year.

 

[fiftyeight]

I made a comment in the PLS thread, re FMG reporting on their C1, and PLS should be reporting a similar number if they are truly trying to be a low cost Li producer.


Just had quick look while on lunch, and the earliest I can find FMG mention their C1 is the Half year Report 2012. Is this correct or have I missed something?

 

[Value Collector]

Well at the moment shipments are up, price is high in US dollars, and the Aussie dollar super low, so we are printing money at the moment.

But sure, there could be disruptions or slowed production at some point in the future, but I don't see that as being any sort of long term blow, surely nothing that justifies a PE of less than 5.

I would think FMG's share price is so low compared to their current earnings, that all sorts of factors are already priced in.

I mean they could completely shut down for 3 months and still have a PE of less than 10 for the year.

FMG are still going from strength to strength and generating a lot of cash at the moment.

Iron Ore prices are over $100, and the cash is flowing in, as a result the share price has gone well over $14, not to mention the very large dividends of late.

The crazy thing is if dividends continue at the same rate, it is still a 10% fully franked return even at todays share price.

I think unless we see Iron Ore prices drop well below $80, then FMG is probably worth at least $18, maybe $22 if the good times keep on rolling.

 

[systematic]

I think unless we see Iron Ore prices drop well below $80, then FMG is probably worth at least $18, maybe $22 if the good times keep on rolling.

...Sounds good to me! As of Friday, they're 13% of my portfolio. On my radar since 2014/15 - think I first mentioned in this thread in 2014, but never needed them until August dip last year...yep, 2019! Got in ~$7.00 Been a nice trade and all, but wish I'd put them in the portfolio a little earlier!

 

[Barry2020]

If I could exclude FMG from my Fund's holdings I would. Twiggy Forrest, UNaustralian of the Year. Does he have a conscience? All those people the CCP has enslaved, tortured and murdered! So called Ethical Funds probably shouldn't hold FMG.

 

[over9k]

All the big 3 are basically flat for the last month and down significantly since roughly the 9th of june. Might be decent long positions, but I suspect there's some more dips yet on account of virus data playing merry hell with things. All good times to buy.

Oh and iron ore prices won't drop - brazil's going to be obliterated. That's 25% of global supply right there.

 

[martaart077]

Forrest is one of those who would sell out our national sovereign interests if he could turn a dollar.
Hijacking a federal press conference by bringing an un invited Chinese govt official.....
And the press conference was about him doing deal with Chinese to bring in crappy face masks at over inflated prices.....in a plane originating from wuhan. The Chinese must have been laughing themselves sick ( cough cough) over that one. What a philanthropist Forrest is.....
Rub a bit of salt into the wound, we tax payers end up paying for it as well.
As an Aussie.. I'm not happy with it
As a GSS shareholder I'm also not happy with it.
It sort of symbolises what's wrong with this country.
Certainly in the reverse situation, the Chinese would not have allowed this to occur.

 

[Kerway]

Twiggy Forrest, UNaustralian of the Year. Does he have a conscience? All those people the CCP has enslaved, tortured and murdered! So called Ethical Funds probably shouldn't hold FMG.

The Forrest family have a long and distinguished history here in WA. Twiggy's $25 mil donation to UWA is the single largest donation in the history of WA. FMG alone paid $1.382billion in income tax alone last financial year. Twiggy and his tens of thousands of employees have also no doubt paid a lot of tax. He is also contributing hundreds of millions of dollars to schemes to irrigate land currently unsuitable for farming. If only we had more like him, WA and Australia would be far better off.

If you are not going to invest in a company that does business with China you'll certainly have to exclude a great number of Australian companies from your portfolio.

 

[Barry2020]

The Forrest family have a long and distinguished history here in WA. Twiggy's $25 mil donation to UWA is the single largest donation in the history of WA. FMG alone paid $1.382billion in income tax alone last financial year. Twiggy and his tens of thousands of employees have also no doubt paid a lot of tax. He is also contributing hundreds of millions of dollars to schemes to irrigate land currently unsuitable for farming. If only we had more like him, WA and Australia would be far better off.

If you are not going to invest in a company that does business with China you'll certainly have to exclude a great number of Australian companies from your portfolio.

My last word on the matter in this thread as its getting OT. All businesses try to win hearts and minds by doing those sort of things, its PR. Here though, he knew which side his bread was buttered on. He aided and participated in CCP propaganda for his own financial interest. Those who do that are aiding the CCP to enslave, torture and murder more people. He said, "stuff everyone else, I'm looking out for number 1, no matter what". Business is business, but don't go jumping into bed with them (the CCP), at least have an arms length relationship.

 

[Kerway]

He aided and participated in CCP propaganda for his own financial interest. Those who do that are aiding the CCP to enslave, torture and murder more people

What a lot of nonsense.

China is Australia's biggest trading partner, by a country mile. They receive 33% of our exports. Our next biggest trading partner is Japan on only 9%. Allowing the Chinese Consul to express his opinion (or the Chinese view on any matter) goes to the core of what Australia is all about. Of course he has a vested interest in not harming our trade with China, but then so has every single Australian. Suggesting that by doing so he is aiding slavery, torture and murder is simply a gross misrepresentation of what happened.

Twiggy suggested that everyone should "take a chill pill"....not just Australians. He merely wanted everyone to agree to disagree.