FMG - Fortescue Ltd

[Gunnerguy]

@DrBourse and @Value Collector you both have more idea, than I ever will, so as long as you both keep posting your thoughts on stocks I'm exceedingly happy.

..... and that they don’t deteriorate in to an argument that unfortunately is not uncommon in ASF.
GG

 

[Value Collector]

This is a quote from The Warren Buffett Way.

Please make sure you take note of the sentences in the middle of the snapshot below:-
Originally, Intrinsic Value was thought to be the same as a company's Book Value, or the sum of it's real assets minus obligations.
However, analysts came to know that the value of a company was not only its Net Real Assets but, additionally, the value of the earnings these assets produced.

View attachment 133392
======================================

The following is a snapshot from a Google Search
https://www.quora.com/What-is-the-difference-between-the-book-value-and-intrinsic-value-of-a-company
Niels Andersen
, Strategy Consultant, CEO and startup founder
Answered 1 year ago
Here is a quick definition of the two, which is followed by an example.
In very rough terms, it can be seen like this:
Book value is the amount of money the company would be left with if it sold all assets and paid all debt. This is the asset value minus liabilities you would see in their financial report.
Intrinsic value is the value of all the company's future cash flows to its owners (investors). This includes dividends and the eventual sale of the company to another owner (investor).
The difference is then, that the amount of money the owner(s) would get if the company was closed today is the book value, whereas the intrinsic value is the sum of all future distributions of dividends to the owner(s) plus the value of the company when sold sometime in the future.

Let's take an example below.
Company XYZ is a wholesaler of flour. They own a fleet of trucks for delivery, which they paid 10 million for through 5 million of their own money and 5 million borrowed money. The fleet would net them 6 million if sold, and they haven't repaid any of their debt yet. They also own a warehouse worth 10 million if sold, which they paid for themselves entirely.
The company is expected to earn and distribute 2 million to its shareholders annually through dividends for the next 10 years, and after the company will be sold for 12 million.
The company’s book value is then:
Book value = Warehouse value + Fleet value - Debt = 10 + 6 - 5 = 11 million
The company’s intrinsic value to the owner (investor) is then:
Intrinsic value = annual dividend * years + value of sale of company = 2 * 10 + 12 = 32 millions

I hope this was helpful.
Note: If you actually go and liquidate a company, there are of course some expense to do so, and the amount of money you’d be able to recover from this after these expenses is the liquidation value, not the book value. In the above example, the way the company values its assets is based on, what they would be able to get if sold. If other practices are used by a company, which they usually are, the book value can vary considerably from this.
==========================================

And here are some of the Formulas used to determine the IV
View attachment 133393
AND
View attachment 133394
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View attachment 133395
AND
View attachment 133396

AND,There just happens to be more - such as:-
An IV can be calculated in numerous different ways – A correct and Valid IV relies a lot on what formulas are used, such as, DCFM, DDM, DDMF, PRESVAL, RIV, IVRR, NROE, CGVI, GIVF, BIVF – and there are numerous others - MAKE SURE YOU UNDERSTAND WHICH FORMULAS ARE BEING USED and what the implications are relating to each formula...Remember the old saying, “Garbage in = Garbage out”.......
DCFM = Discount Cash Flow Method, DDM = Dividend Discount Method, DDMF =Dividend Discount Method (Forward Return on Equity), PRESVAL = Calculates the Present Value of the Discounted Future Cash Flow per Share, RIV = Residual Income Valuation, IVRR = Intrinsic Value by Rate of Return, NROE = Normalised Return on Equity, CGVI = Comparative Growth & Value Indicator, GIVF = Grahams IV Formula, BIVF = Buffetts Balance Sheet IV........
==========================================
Hope that clarifies where I'm comming from.

Cheers.
DrB

Yep, I read the book “the Warren Buffett way” I have a copy in my book shelf, What it describes is my definition of intrinsic value, not what you originally described based on the balance sheet.

Now go back and look at the original paragraph you wrote that I quoted, and you will see that is not what you were describing, you were describing book value.

take your pick of any of these Buffet style books I just pulled from my book shelf, you won’t find your original description of IV in any of them, but I do note that your latest description doesn’t match your original description, which is the one I was saying was book value.

 

[UMike]

I did not really want to complicate this Day Trading Profession, because I know it interfeeres with sptrawlers Bodily Functions, so I did not mention that, as I suggested, I sold @ 17.585, took my profits, waited a while then bought back in @ $17.25213.

Bought 2g at $14.2 and $13.91. Never held it before.

Not sure it will hit $19 but not really a day trader. Follow this with interest.

 

[Value Collector]

Remember that Book Value, although referred to in todays climate, it is very much Old Hat, since Warren Ben proved it was NOT representative of a Stock Valuation/IV.

I agree book value is of limited value by itself, but as I keep saying the paragraph I quoted you are literally describing book value, that why I mentioned that you were confusing IV with book value.

But either way, as I said you do you, it doesn’t bother me what you personally think IV is, and the stuff you quoted from the buffet way is IV, but that’s just not what you were saying originally.

so in the interests of not clogging up this thread I will leave you to it.

 

[DrBourse]

Yes I agree we've hijacked this forum, sorry about that Joe, we all got a bit sidetracked.

And I've lost track of my FMG Trade - I will try to make an appearance tomorrow and continue the running commentary.

 

[DrBourse]

Hi VC,

May have discovered why we differ on a few minor points of Buffett’s Theories.

We are reading different editions of The Warren Buffett Way.

The following explains the differences.
We are obviously ‘on the same page’ but with a few variations involved, your definition is based on v3, mine is based on v1.

Have attached a snapshot of page 296 from v1, that is not in your v3.

From the info on page 296, and from the other missing 45 pages, it is relatively easy to understand how to calculate the Owners Earnings, and then where the IV comes from.

IV takes into account, Best & Worst Growth Rates, Bond Rate, Capitalisation Rate, Number of Shares Outstanding, NPBA, Depreciation, Amortisation, Capital Spending, Required Return (Roger Montgomery’s “Valuable” explains that very well), Forward ROE (Over 2 periods), Payout Ratio (Over 2 periods), Free Cash Flow, Earnings Growth Rates (Over 2 periods), Discount Rates, Cash Earnings, Discounted Dividends, Future Currency Discount Rates, Future Distribution of Dividends, and few other items.



Book Value Definition: Formula & Calculation (investopedia.com) explains Book Value as:-
“Book value is equal to the cost of carrying an asset on a company's balance sheet, and firms calculate it netting the asset against its accumulated depreciation. As a result, book value can also be thought of as the net asset value (NAV) of a company, calculated as its total assets minus intangible assets (patents, goodwill) and liabilities. For the initial outlay of an investment, book value may be net or gross of expenses such as trading costs, sales taxes, service charges, and so on.
The formula for calculating book value per share is the total common stockholders' equity less the preferred stock, divided by the number of common shares of the company. Book value may also be known as "net book value" and, in the U.K., "net asset value of a firm."

Intrinsic Values usually calculates out to be double the Book Value.

Hope that clarifies where I’m coming from.

Cheers
DrB

 

[Garpal Gumnut]

Yes I agree we've hijacked this forum, sorry about that Joe, we all got a bit sidetracked.

And I've lost track of my FMG Trade - I will try to make an appearance tomorrow and continue the running commentary.

Hi VC,

May have discovered why we differ on a few minor points of Buffett’s Theories.

We are reading different editions of The Warren Buffett Way.

The following explains the differences.
We are obviously ‘on the same page’ but with a few variations involved, your definition is based on v3, mine is based on v1.
View attachment 133458


Have attached a snapshot of page 296 from v1, that is not in your v3.
View attachment 133459
From the info on page 296, and from the other missing 45 pages, it is relatively easy to understand how to calculate the Owners Earnings, and then where the IV comes from.

IV takes into account, Best & Worst Growth Rates, Bond Rate, Capitalisation Rate, Number of Shares Outstanding, NPBA, Depreciation, Amortisation, Capital Spending, Required Return (Roger Montgomery’s “Valuable” explains that very well), Forward ROE (Over 2 periods), Payout Ratio (Over 2 periods), Free Cash Flow, Earnings Growth Rates (Over 2 periods), Discount Rates, Cash Earnings, Discounted Dividends, Future Currency Discount Rates, Future Distribution of Dividends, and few other items.



Book Value Definition: Formula & Calculation (investopedia.com) explains Book Value as:-
“Book value is equal to the cost of carrying an asset on a company's balance sheet, and firms calculate it netting the asset against its accumulated depreciation. As a result, book value can also be thought of as the net asset value (NAV) of a company, calculated as its total assets minus intangible assets (patents, goodwill) and liabilities. For the initial outlay of an investment, book value may be net or gross of expenses such as trading costs, sales taxes, service charges, and so on.
The formula for calculating book value per share is the total common stockholders' equity less the preferred stock, divided by the number of common shares of the company. Book value may also be known as "net book value" and, in the U.K., "net asset value of a firm."

Intrinsic Values usually calculates out to be double the Book Value.

Hope that clarifies where I’m coming from.

Cheers
DrB

Mate.

I don't think you have hijacked this thread.

You have flown it to a desert outside Amman and blown the ******* thing up.

gg

 

[Country Lad]

Too far back to see where the last comment was on FMG, so suffice to say up on a down day which isn't turning down as far as most thought. Commonsense on the new Omircron strain seems to be kicking in.

 

[basilio]

Turning old coal to Green Hydrogen.

'Twiggy' Forrest, AGL partner to explore hydrogen option for Hunter Valley coal plants​

Key points:​

• AGL and Fortescue Future Industries have signed a MOU to explore a hydrogen hub in the Hunter Valley
• A feasibility study will look at building the hub on the site of two coal-fired power stations
• The study will take 12 months to be completed

Forrest says hydrogen will 'dwarf' coal as he unveils Hunter Valley energy project

The mining billionaire partners with the energy giant to explore the feasibility of building a green hydrogen hub on the site of the Liddell and Bayswater coal-fired power stations.

www.abc.net.au

 

[sptrawler]

Turning old coal to Green Hydrogen.

'Twiggy' Forrest, AGL partner to explore hydrogen option for Hunter Valley coal plants​

Key points:​

• AGL and Fortescue Future Industries have signed a MOU to explore a hydrogen hub in the Hunter Valley
• A feasibility study will look at building the hub on the site of two coal-fired power stations
• The study will take 12 months to be completed

Forrest says hydrogen will 'dwarf' coal as he unveils Hunter Valley energy project

The mining billionaire partners with the energy giant to explore the feasibility of building a green hydrogen hub on the site of the Liddell and Bayswater coal-fired power stations.

www.abc.net.au

Great move IMO, developing clean energy, especially hydrogen generation on the sites of old power stations, is a no brainer.
Having the switchyard and associated equipment in place reduces the overall project costs massively.
If they can install an electrolyzer and enough renewables to feed it, it will only be a matter of installing optimum size gas turbines as the old station is progressively decommissioned and removed, working with AGL is a game changer two companies one with a stranded asset and the other with the money to help save it.
It may actually save AGL's ar$e IMO. I will put them on the watchlist even though I've never been a fan of utilities, but this plan has legs.lol
Magic move.

 

[Value Collector]

Great move IMO, developing clean energy, especially hydrogen generation on the sites of old power stations, is a no brainer.
Having the switchyard and associated equipment in place reduces the overall project costs massively.
If they can install an electrolyzer and enough renewables to feed it, it will only be a matter of installing optimum size gas turbines as the old station is decommissioned and removed, working with AGL is a game changer two companies one with a stranded asset and the other with the money to help save it.
It may actually save AGL's ar$e IMO. I will put them on the watchlist even though I've never been a fan of utilities, but this plan has legs.lol
Magic move.

Also, the power station sites sits right on and is connected to the high voltage transmission system, and will be able to import cheap power when it’s available on the grid, when it’s windy at night or sunny during the day.

 

[sptrawler]

Also, the power station sites sits right on and is connected to the high voltage transmission system, and will be able to import cheap power when it’s available on the grid, when it’s windy at night or sunny during the day.

Yeh that's what I was saying, with having the switchyard and associated plant already in situ, the switchyard is where all the high voltage transmission equipment is located.
Being able to use the power is a small component, already having the groundworks, the cable tunnels, the switchgear, the protection equipment etc already in place and being of a know size and ratings saves a massive amount of engineering and earthworks, design and procurement of equipment, it is massive plus. Add to that not having to procure transmission easement, it is a mind boggling saving.
Even from an AGL perspective, they could now plan which unit is realistically the best to remove to enable removal and replacement, with a longer term plan of the next step.
Rather than just removing whichever unit is the biggest pain in the ar$e first, in the scheme of things it might now actually be the last one to be removed, if it suits the end game.
Just a brilliant move by Twiggy IMO.
This is the exact reason the big private equity firms are interested in the old power station sites.

 

[basilio]

Twiggy has noted that FMG intends to develop cost effective processes to run ships on hydrogen.

I came across this development which use low grade hydrogen from ammonia to power electric fuel cells for cargo ships.

Exclusive: AFC Energy CEO discusses the company’s hydrogen fuel cell and ammonia cracker solution and its fit in the maritime industry​

By Molly Burgess on Dec 01, 2021
Translate
News Exclusive

HyPoint - Official Sponsors of H2 View's Technology Content

A new zero-emissions ship will soon be hitting Norwegian waters – and AFC Energy’s hydrogen fuel cell and ammonia cracker technology has been selected to power the landmark vessel development.

Marking a milestone moment for both the UK-based business and the maritime industry, AFC Energy’s hydrogen fuel cell and ammonia cracker was today (Dec 1) awarded approval in principle (AiP) status for the ZeroCoaster ammonia fuelled cargo ship.

Although perhaps not the most commonly used technology for green transportation, AFC Energy’s alkaline fuel cell with ammonia cracker is set to open up a number of opportunities due to its ultra-high-power density which surpasses alternative technologies on the market today.

To find out more about the technology and AFC Energy’s involvement in the maritime industry, H2 View earlier caught up with Adam Bond, CEO of AFC Energy. “The hugely carbon intensive maritime industry is one of the major markets that is best placed to benefit from AFC Energy’s zero-emission power systems,” he said.

“AFC Energy’s S-Series fuel cell system utilises an alkaline fuel cell technology, which entails the electrochemical combination of hydrogen and oxygen in a non-combustion process to, essentially, convert chemical into electrical energy.

“A key and unique advantage of AFC Energy’s fuel cell technology is its ability to utilise low grade – and therefore, low-cost – hydrogen fuel, such as that derived from ammonia. Ammonia, as a liquid inorganic carrier possessing no carbon-hydrogen bonds, can be ‘cracked’ upon end-point arrival to produce hydrogen and nitrogen, producing only heat and water as reactive by-products – hence, zero emissions.
“The S-Series fuel system, therefore, can provide a current density which surpasses alternative high-power density cells in the market today, without the need for costly, ultra-high purity hydrogen. This technology will provide the ship with 1.2MW of capacity.”

Exclusive: AFC Energy CEO discusses the company’s hydrogen fuel cell and ammonia cracker solution and its fit in the maritime industry

A new zero-emissions ship will soon be hitting Norwegian waters – and AFC Energy’s hydrogen fuel cell and ammonia cracker technology has been selected to...

www.h2-view.com

 

[sptrawler]

. This technology will provide the ship with 1.2MW of capacity.”

That is a very small ship, sounds more ferry, but hey it all has to start somewhere. Twiggy is picking clever targets, rather than jumping in the deep end IMO.
For example the Saphire Princess cruise ship, I think has four 9.5 MW propulsion motors, it doesn't carry a very heavy cargo, well some of the passengers are very heavy but nothing like an iron ore carrier.
Here is a good article on the cleaning up of cargo ship emissions.

The Struggle to Make Diesel-Guzzling Cargo Ships Greener

How these emission-belching behemoths will transition to batteries and fuel cells

spectrum.ieee.org

 

[dat111]

In order to be balanced on the green initiative from an investment standpoint... I think the following article would be helpful to put the green initiative into perspective.

The "New Energy Economy": An Exercise in Magical Thinking

A movement has been growing for decades to replace hydrocarbons, which collectively supply 84% of the world’s energy. Energy expert, Mark Mills, explains why replacing hydrocarbons will not meet America's energy demands.

www.manhattan-institute.org

 

[Greynomad99]

Hi Shark,
M8, A Gap is still a Gap regardless of the reasons - in fact a Gap caused by a Dividend probably caries more weight than a Gap caused by a rogue trade, or a sell-off/spike caused by rumours, or as you mentioned, an unexpected news event.
I will mention however, that an Ex Div Gap probably won't take long to fill, unless there are other underlying issues.
see pages 203 to 212.

Remember that not all stocks have a SP Drop on Dividend Ex Dates.

Cheers.
DrB

Hi Dr B - I've never been a huge fan of FMG but I'm in it at the moment and it seems to be powering along. Price has made a small resistance break pattern recently suggesting price will move up to $19. However, price is largely driven by iron ore prices rather than the company's historical performance - and with China seemingly sucking lemons lately when it comes to Australia, anything is possible.

 

[DrBourse]

Hi GN,
As usual, our TA is similar, I cannot see any TA roadblocks ATM, Yep as I suggested some weeks back abt $19.00 is the next point for "profit takers", However, I don't think the Shorts will hit FMG just yet, so at the next level of abt $20.00 I feel we need to be cautious, and run with a Very Very tight stop, then personally I will be OUT sometime B4 $21.00 - in the lead up to $21.00 FMG's Candles will form what's known as an "Equal & Opposite (page 28) or a Symetric V", the number of Red Candles between $20.00 & $21.00 will produce enough signals to pick my Exit Point.

FMG's IV is between $22.89 & $23.89 - and their Financials (Ratios & MOS) mostly rate as Very Good.

Cheers M8

 

[divs4ever]

FMG CEO to leave post but remain on board​

FMG CEO to leave post but remain on board

SYDNEY, AAP – Fortescue Metals Group CEO Elizabeth Gaines is leaving her post as the company transitions from an iron ore and metals explorer play to a green energy and resources group. But she will remain on the board as a non-executive director, FMG said in a statement to the Australian...

thebull.com.au

DYOR

i hold FMG

 

[Garpal Gumnut]

Interesting negative articles, well mildly negative, on the change of CEO and Twiggy's looser style of control over the H2 side of FMG's business.

I'd ignore them if you see them.

New energy startups require a different hand than old style pick n shovelling.

Unless... Unless FMG starts going a-up.

Even then the ole Twiggs will be ruthless.

gg

 

[basilio]

I think the decision to look for a new CEO and additional senior staff to take FMG in the green energy direction is inspired and essential.

This is a huge move and finding the very best key executives to guide and manage the multiple projects will be essential to keeping all the balls in the air.

Elizabeth Gaines has been an excellent CEO for FMG. She is still staying on board. I think the advertisment of these positions will inspire some of the very best international talent to throw their hat into the ring. The fact that she will be on the selection committee speaks well of her position and ongoing role. It's clear from the Press Release they are looking for multiple talent.

Australia's iron lady driving FMG in a new direction

Growing up in Western Australia's remote Kimberley has left its mark on how Fortescue boss Elizabeth Gaines sees the world and runs the company.

www.abc.net.au

Fortescue's iron lady Elizabeth Gaines steps down as CEO

The first female CEO of Andrew Forrest's Fortescue Metals Group will stand down, but remain on the board, as the company transitions away from a pure play iron ore miner.

www.abc.net.au

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02465205-6A1068040?access_token=83ff96335c2d45a094df02a206a39ff4