ZFX - Zinifex Limited

[GreatPig]

GP what happens after a shoulder has completed? Does it keep going down or bounce back?

See my earlier message #601.

GP

 

[GreatPig]

To be or not to be, that is the question...

GP

 

[cuttlefish]

if lme zinc keeps heading the way it started tonight then I vote "to be".

 

[BentRod]

Zinc down 10% ATM.

GP...looks like a wave 3 to me which would mean quite a bit of downside to come.

cheers

 

[The Barbarian Investor]

WOW..what a difference since i last visited this thread and held this stock....

ZFX powered on after the initial post and my holdings..i sold out to buy IP#4 in Perth (Fully Furnished IP for $290k now worth about $350k (rented at $300 p/wk PLUS depreciation etc) now and apart from Equity..nothing down)

TBI

 

[michael_selway]

Zinc down 10% ATM.

GP...looks like a wave 3 to me which would mean quite a bit of downside to come.

cheers

yeah if Dow and/or zinc price fell alot yeah of course

thx

MS

 

[BentRod]

yeah if Dow and/or zinc price fell alot yeah of course

I was refering to the next couple of weeks, not for Friday.

If it is a wave 3, the target price is around $7.

 

[GreatPig]

Yeah, IMO the target downside would be the low-mid $7 range too.

GP

 

[scsl]

Hi all

Been reading up on this site for a while now but have only just started to post...

I've had my eye on ZFX lately and had a few questions that I was wondering you'd be able to help me on. Firstly, why does ZFX trade on a fairly low PE ratio? Even when it was trading above $13, its PE was about 8, based on consensus estimates (off Commsec) of 2006 earnings.

I read that stocks like Google, Seek and Lihir have really high PEs becuase of their expected high earnings growth to continue. So with zinc at low supply and higher prices set to continue, why doesn't ZFX trade above a PE of 20, or even at 15?

I also just had a look at Kagara Zinc, and they trade on a PE of 18.45... Or are ZFX's earnings growing too fast for investors to cathup, if that makes any sense? And particularly if more earnings upgrade come along, the PE will go even lower. Is there something I should know about ZFX??

Thanks in advance!

 

[rederob]

scsl
Not sure what you are looking at - possibly historical data.
Below is from the Comsec site, current at time of posting.
As you can see, forward p/es are very low:

 

[nizar]

scsl
Not sure what you are looking at - possibly historical data.
Below is from the Comsec site, current at time of posting.
As you can see, forward p/es are very low:

rederob

u misunderstood the question

the question was; in my understanding; why is that ZFX trades on a low p/e multiple?

ie. why are investors prepared to pay 18x earnings for KZL but only 8x earnings for ZFX ?

i too, am keen to know the answer 2 this question; as companies who grow their earnings rapidly; are meant to demand higher p/e to correlate with their strong earnings growth

maybe the answer is; investors are willing to pay more $$$ for ZFX; hence the impressive share price movement in the last 12 months; but pe is still low BECAUSE ZINIFEX HAVE BEEN GROWING THEIR EARNINGS TOO FAST..

 

[cuttlefish]

rederob - think scsl was talking about pe of 8 at price of over $13.00 - current comsec data would be based on most recent closing prices? ( 9.60?)

9.6/13.74 * 'about' 8 = 'about' 5.


scsl - all I can offer is that for mining stocks PE is one indicator, but value of resources in the ground is an important factor as well - once all the stuff's been dug out its game over unless exploration has found more somewhere else.

This is very different to a typical industrial stock like a CML, NAB, MIG etc. where earnings should be consistent into the distant future as long as the company is well managed.

 

[specman]

rederob - think scsl was talking about pe of 8 at price of over $13.00 - current comsec data would be based on most recent closing prices? ( 9.60?)

9.6/13.74 * 'about' 8 = 'about' 5.


scsl - all I can offer is that for mining stocks PE is one indicator, but value of resources in the ground is an important factor as well - once all the stuff's been dug out its game over unless exploration has found more somewhere else.

This is very different to a typical industrial stock like a CML, NAB, MIG etc. where earnings should be consistent into the distant future as long as the company is well managed.

I believe the "resources in the ground" for ZFX is pretty healthy as well.Zinc reserves are stated at around 13 million tonnes and most of that is proven and probable reserves,not inferred.At present market prices,that is equal to around 60 billion AUD.The market cap of ZFX is around 5 billion.Don't forget they have lead,silver and gold reserves also.

P.E of a mining company would be an indicator of how fast and efficient they are getting the stuff out of the ground.

 

[watsonc]

Hi all,

Just wondering how much further down this stock will go? Has it bottomed out now? or will it reach mid-7s like some have suggested? $9.60s sounds like a good buy in price for a hold until early next year.

thx

 

[nizar]

Hi all,

Just wondering how much further down this stock will go? Has it bottomed out now? or will it reach mid-7s like some have suggested?
thx

Hmm... isnt that the question we would all love to know?

If i knew stuff like that, id be a VERY RICH man by now...

 

[rederob]

Nizar and others, I did misread the question.
A possible answer is the fact that the large holders of ZFX are basing its value on the longer term "forecast" price of zinc, which is nearer 60cents - rather than nearer its present day 160cents.
In simple terms they are discounting its price based on the probability it will soon be into oversupply.
My suspicion is that once ZFX publishes its annual report and institutions can see its still undervalued at $15 in a market for zinc that is increasingly tighter, they will be reluctant to take profits to the extent they have of late.
Another answer is that the market generally is skeptical about the long term commodity bull cycle, and prefer the lure of BHP and RIO (with international clout) to a poor Aussie battler come good.
A final point to the newcomers: Pasminco traded well above a dollar for most of its 15 year history before collapsing to 5cents in September 2001. In doing so, it burnt many investors - investors who probably remain skeptical about the merits of zinc mining to this day, despite ZFX transmogrifying the company (PAS) and delivering IPO holders a 5 bagger.

 

[scsl]

Thanks guys! So anyone think that ZFX is likely to be re-rated to above 15 times earnings in the future??

It announced at the end of May that it would "triple its spending on exploration work around its Rosebery zinc and lead mine in Tasmania over the next three years in a move that could extend the life of the operation beyond 2021". If Rosebery's reserves were boosted significantly, would ZFX have a huge re-rating?

 

[michael_selway]

Thanks guys! So anyone think that ZFX is likely to be re-rated to above 15 times earnings in the future??

It announced at the end of May that it would "triple its spending on exploration work around its Rosebery zinc and lead mine in Tasmania over the next three years in a move that could extend the life of the operation beyond 2021". If Rosebery's reserves were boosted significantly, would ZFX have a huge re-rating?

Fwd PE of 15 is too high i think, fwd PE of 10 is fair value IMO or 10% pa in the future. $16 if u use 2008 EPS forecasts

Earnings and Dividends Forecast (cents per share)
2005 2006 2007 2008
EPS 35.9 184.9 279.5 162.8
DPS 4.0 43.0 50.0 35.0

If you see above, the threat of oversupply isnt really that great. In fact supply increased alot during 2001-2003, Tech Wreck/Sep 11/SARS periods. But before that supply was infact already decreasing rapidly. Pasminco must have been really unlucky.

thx

MS

 

[scsl]

Sorry Michael, but what does "fair value IMO or 10% pa in the future" mean?

And also, when stock analysts set a price target, do they usually set it based on next year's earnings? Becuase I read somewhere recently that they wrote: "...based on 2007 estimate of earnings."

thx

 

[rederob]

And also, when stock analysts set a price target, do they usually set it based on next year's earnings? Becuase I read somewhere recently that they wrote: "...based on 2007 estimate of earnings."

scsl
In my earlier post of Comsec analyst forecasts for ZFX you can see a 40% variation in forecast in 3 months.
Forecasting is prone to error and about the only thing you take from it is a probable uptrend in the case of ZFX going forward.