FMG - Fortescue Ltd

[basilio]

The recent profits earned by FMG have been, frankly, astronomical. And of course WA, The Federal Government, Twiggy Forrest and us other shareholders have all had an excellent run.

FMGs determination to rapidly develop massive sustainable energy projects is the insurance against China potentially developing alternative suppliers. And who knows. Perhaps with massive cheap energy supplies FMG could develop Australia own new steelworks on site to value add or bring in the appropriate partner.

 

[joeno]

loving the price action. only regret was back in the day i decided to put $5k into Sundance Resource rather than adding to my fortescue position. This was in 2015!

I wouldn't worry about China using other suppliers. FMG has had good relationships with China, donated masks to China back in Feb this year, and shown respect. Anyone with half a brain would know FMG will be the last to be hit by this trade war... unless Scomo takes some drastic actions to worsen relations with China. Which at this point is unlikely.

 

[over9k]

Just watched a twiggy interview on bloomberg. He near as no difference said he's transitioning a lot of his business into being a renewable energy business. Considering the amount of energy needed to actually produce steel, it makes a lot of sense

I've posted in the MCR thread as well.

Ok so I did buy some MCR, and check this out:

Twiggy's definitely up to something, and I suspect it's a case of copying someone else, but who cares, if it works this well...

 

[over9k]

Just checked this out. WOW.

 

[peter2]

Random thought: If the Fed Gov't cancels Victoria's Belt&Road contract with China, will China retaliate through our iron ore exports?

 

[Value Collector]

Random thought: If the Fed Gov't cancels Victoria's Belt&Road contract with China, will China retaliate through our iron ore exports?

I don't actually think china can afford to reduce Iron Ore exports at the moment, the price of Iron Ore is already through the roof.

 

[sptrawler]

Random thought: If the Fed Gov't cancels Victoria's Belt&Road contract with China, will China retaliate through our iron ore exports?

I'm sure, if they can, they will. You can take that to the bank.
They are caught in a cleft stick ATM, they need iron ore for their stimulus infrastructure spend and the urbanising of the masses and we supply 60% of it.
If they can get it elsewhere they will, but it ain't that easy, we are very geared up to dig it and ship it, Africa isn't.
Just my thoughts.

 

[over9k]

Random thought: If the Fed Gov't cancels Victoria's Belt&Road contract with China, will China retaliate through our iron ore exports?

Short term no, long term yes.

Short term, brazil's been obliterated by coronavirus. AU's supplying even more of the world's iron ore than usual at the moment. But once brazil gets cured (a solid year or so away), then yes.

But AU could also negotiate a supply deal with USA as part of an allied economic sanction or something like that. We'd obviously need someone (USA) to pick up the demand slack, but it's more than conceivable if china really gets on their sh!tlist, which they're well on their way to doing. Hawkishness on china is by no means unique to trump.

 

[Value Collector]

I'm sure, if they can, they will. You can take that to the bank.
They are caught in a cleft stick ATM, they need iron ore for their stimulus infrastructure spend and the urbanising of the masses and we supply 60% of it.
If they can get it elsewhere they will, but it ain't that easy, we are very geared up to dig it and ship it, Africa isn't.
Just my thoughts.

Also demand is growing at about 35 Million tonnes per year, it would take a huge investment to not only cater for the demand growth, but on top of that build out enough green field infrastructure to replace us, Africa has their own economic growth story to fulfil any additional economic stimulus Africa receives will boost over all steel demand there to and add to the amount of sea borne Iron ore required

 

[basilio]

Another analysis of why Iron ore prices are rocketing and not likely to come down for the next 12 months.
Bit of a perfect storm for FMG.

Iron ore — the commodities sector’s runaway train

Iron ore at US$150 per tonne is now being talked about after the 62% fines price moved above US$145/t on Friday (and came just US$1/t short of that key threshold in Chinese futures trading).

smallcaps.com.au

 

[Dona Ferentes]

three periods where FMG pulled away in last 12 months
1. mid March ... recovered early when Covid hit
2. July ............... steady appreciation
3. December ..... done a bolter

One year FMG, vs Materials XMJ and ASX200 XJO:

 

[over9k]

 

[basilio]

Talk about starting 2021 with a Bang !!
Currently up almost 5% and an all time high. Racing through revised projected highs from the analysts.

I think the past 6 months results will be reaching new heights and should reflect in increased dividends . We'll see how 2021 pans out in terms of trade with China. I do think FMG will be moving as rapidly as possible to their renewable energy projects. It is inevitable that iron ore prices will subside and China will be doing all it can to diversify supply. The mines in Brazil can't be expected to underperform forever either.

 

[over9k]

Yeah MCR flew too

 

[againsthegrain]

Yeah MCR flew too

Instead or selling mcr and buying fmg should of doubled down on both, ah well

 

[over9k]

We'll see. I bought FMG as a dividend stock and MCR as a growth and so far FMG's been a growth as well as a dividend so I'm not complaining.

 

[Value Collector]

Talk about starting 2021 with a Bang !!
Currently up almost 5% and an all time high. Racing through revised projected highs from the analysts.

I think the past 6 months results will be reaching new heights and should reflect in increased dividends . We'll see how 2021 pans out in terms of trade with China. I do think FMG will be moving as rapidly as possible to their renewable energy projects. It is inevitable that iron ore prices will subside and China will be doing all it can to diversify supply. The mines in Brazil can't be expected to underperform forever either.

Yep, Brazil’s production will rise I wouldn’t bet on it rapidly though, I would be surprised if Vale could increase production faster than the Iron Ore demand grows.

it’s also important to remember Fortescue divided yield would still be pretty good even if the share price went to $28 and the Iron ore price dropped to $93, any price above that is just gravy.

in my opinion this high iron ore price was triggered by the low production from vale, buts its root cause was the under investment in new supply during the low iron ore price years back around 2016, and that supply imbalance is going to take a while to remedy, and should only bring iron ore prices back to $80 or $90, which as I said is still a very good spot to be for fmg, but in the mean time the cash machine continues to pump.

 

[over9k]

Just buy BRZU if you're concerned

 

[joeno]

Given the current market conditions i think FMG is still grossly undervalued despite the somewhat princely gains us shareholders have had lately.

The reason is: One of the lowest cost producer. Still sitting around 12PE which is exceptionally good. FMG is consistently profitable and consistently growing. 30% annualised growth in revenue AND net income (in recent years). This is huge as it proves it's both a value stock and a growth stock.

In comparison a stock like Amazon has 30% revenue growth and 50% net income growth with a PE of 100.

Tesla has a kingly 50% revenue growth which justifies an almost insane 1000+ PE and other paltry ratios.

The price of FMG should be around 2.5x what it is now. 30PE with 30% growth rate. That's about right for a good hybrid growth/value stock. That few that are <30PE and >30% growth rate typically have some looming risk to their business in the near future.

FMG has a competitive edge, has expansion plans, and if the Aus-China trade war has proven anything is that Iron Ore is a necessity even without having developing countries like India being considered who will in the future be buying more Iron.

Yes. $60/share ($200B market cap) is imo the fair price all things remaining the same.

 

[over9k]

Extremely exposed to china though joeno, and china's on the entire planet's shitlist at the moment and doesn't look like coming off it any time soon.

In other words there's a lot of political risk it's exposed to, which is obviously impossible to quantitatively evaluate. I suspect its price might actually be somewhere up near what you say if not for that factor, i.e it is the political risk that's keeping it where it is.


I'm not selling though