Financial News, Analysis and Data, FNArena

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Equity Bottom-Up

<ul><li>Fortescue&rsquo;s weaker-than-expected quarterly update has heightened concerns over its pricing power, with China&rsquo;s tougher negotiating stance threatening lasting consequences.</li><li> Fortescue&rsquo;s preliminary quarterly operational report disappoints Lower realised pricing reflects China&rsquo;s growing bargaining power Ongoing dispute with buying agency over long-term offtake pricing Bell Potter sees an increasing shift in pricing power towards buyers</li></ul>

Fortescue&rsquo;s weaker-than-expected quarterly update has heightened concerns over its pricing power, with China&rsquo;s tougher negotiating stance threatening lasting consequences. Fortescue&rsquo;s preliminary quarterly operational report disappoints Lower realised pricing reflects China&rsquo;s growing bargaining power Ongoing dispute with buying agency over long-term offtake pricing Bell Potter sees an increasing shift in pricing power towards buyers

Fortescue Confronts A New Pricing Reality

Global Equities, Multi-Asset PM, Dantes Outlook

Damanick Dantes, CMT

Global Equities, Multi-Asset PM

Dantes Outlook

We invest over a full market cycle, using multi-asset portfolios tailored to each global client, from individuals to family offices.

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<ul>
<li>The <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> appears oversold vs. world equities, but has not sustained upside momentum to warrant a broad allocation. Although dividends are nice over the long run.</li>
<li>We constructed a 12-name basket that can scale as the index trend improves. The basket holds a mix of cyclical and defensive stocks.</li>
<li>A narrower rate differential with the US may help, but significantly less so for USD-investors like us. The bar is high for Aussie equities, so we prefer stock selection.</li>
</ul>


The S&amp;P/ASX 200 (AS51 INDEX) appears oversold vs. world equities, but has not sustained upside momentum to warrant a broad allocation. Although dividends are nice over the long run.
We constructed a 12-name basket that can scale as the index trend improves. The basket holds a mix of cyclical and defensive stocks.
A narrower rate differential with the US may help, but significantly less so for USD-investors like us. The bar is high for Aussie equities, so we prefer stock selection.


Australia: Value Down Under Awaiting Confirmation. Here’s a Stock Basket That Scales

Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

<ul>
<li>FY26 shipments of 201.3 Mt of iron ore set a record, breaking 200 Mt for the first time, with mining, processing, and rail all at full-year highs.</li>
<li>Growth is now port-gated at roughly 205 Mtpa, and FY27 C1 guidance of US$20.50 to US$21.75/wmt lifts the cost base by 13 percent.</li>
<li>At A$18.51, it implies a 9.5x FY26e P/E, 4.5x EV/EBITDA, and a 6.9 percent yield. With costs likely to increase, we see earnings lower for FY27.</li>
</ul>


FY26 shipments of 201.3 Mt of iron ore set a record, breaking 200 Mt for the first time, with mining, processing, and rail all at full-year highs.
Growth is now port-gated at roughly 205 Mtpa, and FY27 C1 guidance of US$20.50 to US$21.75/wmt lifts the cost base by 13 percent.
At A$18.51, it implies a 9.5x FY26e P/E, 4.5x EV/EBITDA, and a 6.9 percent yield. With costs likely to increase, we see earnings lower for FY27.


Fortescue Ltd (FMG AU): FY26 Record Shipments, Iron Bridge Impairment, and a Higher FY27 Cost Base

<ul>
<li>Jan-Mar 2025 shipments for Australian miners <a href="https://www.smartkarma.com/entities/rio-tinto-ltd" target="_blank" data-smartkarma-citation="entities:13:1" rel="noopener">RIO AU</a>, <a href="https://www.smartkarma.com/entities/bhp-group-ltd" target="_blank" data-smartkarma-citation="entities:147:1" rel="noopener">BHP AU</a>, and <a href="https://www.smartkarma.com/entities/fortescue-metals-group-ltd" target="_blank" data-smartkarma-citation="entities:41:1" rel="noopener">FMG AU</a>  were sluggish, registering -9.3%,-4.3%, and 0.4% YoY, respectively, due to inclement weather.</li>
<li>
<a href="https://www.smartkarma.com/entities/vale-sa" target="_blank" data-smartkarma-citation="entities:23731:1" rel="noopener">Vale (VALE US)</a> shipments were comparatively better, up 3.6% YoY to 66.1 mn tons. The big four kept their annual production guidance intact. </li>
<li>Positive news came from Vales China clients, as blast furnace utilization passed 90%, and some mills are now making cash profits of 200 RMB/ton. </li>
</ul>


Jan-Mar 2025 shipments for Australian miners RIO AU, BHP AU, and FMG AU  were sluggish, registering -9.3%,-4.3%, and 0.4% YoY, respectively, due to inclement weather.

Vale (VALE US) shipments were comparatively better, up 3.6% YoY to 66.1 mn tons. The big four kept their annual production guidance intact. 
Positive news came from Vales China clients, as blast furnace utilization passed 90%, and some mills are now making cash profits of 200 RMB/ton. 


Gleanings From The Q1 CY25 Shipments Conference Calls Of Vale, Rio, BHP, and FMG

<ul>
<li>
<a href="https://www.smartkarma.com/entities/fortescue-metals-group-ltd" target="_blank" data-smartkarma-citation="entities:41:1" rel="noopener">Fortescue Metals (FMG AU)</a> announced disappointing results, with revenues/profits down 16%/53% YoY, disappointing consensus slightly by 4-5%. </li>
<li>Capex accelerated to 3.5-3.8 bn USD annually, vs the initial 3.2-3.5 USD. The company reduced its decarbonization capex to 400-500 mn USD from the initial &gt;700 mn USD. </li>
<li>
<a href="https://www.smartkarma.com/entities/fortescue-metals-group-ltd" target="_blank" data-smartkarma-citation="entities:41:1" rel="noopener">Fortescue Metals (FMG AU)</a>  dividend payout ratio has reverted to its base level of 65%, yielding a modest 5.3% based on H1FY25's 50-cent distribution.</li>
</ul>



Fortescue Metals (FMG AU) announced disappointing results, with revenues/profits down 16%/53% YoY, disappointing consensus slightly by 4-5%. 
Capex accelerated to 3.5-3.8 bn USD annually, vs the initial 3.2-3.5 USD. The company reduced its decarbonization capex to 400-500 mn USD from the initial &gt;700 mn USD. 

Fortescue Metals (FMG AU)  dividend payout ratio has reverted to its base level of 65%, yielding a modest 5.3% based on H1FY25's 50-cent distribution.


Fortescue Metals Group (FMG AU): The Thrill Is Gone, And So Has The Dividend

Australia

Fortescue Metals Group Ltd. explores for and produces iron ore. The Company conducts business worldwide.

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Fortescue Metals (FMG AU)

Fortescue Confronts A New Pricing Reality

Fortescue’s weaker-than-expected quarterly update has heightened concerns over its pricing power, with China’s tougher negotiating stance...

FNArena

Australia: Value Down Under Awaiting Confirmation. Here’s a Stock Basket That Scales

Australian shares have lagged for a while, but we see opportunity in a basket of trending stocks. We can scale up if the index improves, while...

Damanick Dantes, CMT

Fortescue Ltd (FMG AU): FY26 Record Shipments, Iron Bridge Impairment, and a Higher FY27 Cost Base

Record 201.3Mt shipped, but volume is now capped by port outload near 205Mtpa while C1 steps up 13 per cent, making FY27 a cost and realisation story.

Sameer Taneja

Gleanings From The Q1 CY25 Shipments Conference Calls Of Vale, Rio, BHP, and FMG

We update the operational/shipment performance of the iron ore majors and outline the importance of tracking their numbers.

Sameer Taneja

Fortescue Metals Group (FMG AU): The Thrill Is Gone, And So Has The Dividend

We summarize the results of FMG AU for H1 FY25 and our gleanings from the conference call on the 20th of Feb. Based on the current payout of 65%,...

Sameer Taneja

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