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

Equity Bottom-Up

Shougang Fushan Resources / Equity Bottom-Up

<ul>
<li>We preview <a href="https://www.smartkarma.com/entities/shougang-fushan-resources-group-ltd" target="_blank" data-smartkarma-citation="entities:19494:1" rel="noopener">Shougang Fushan Resources (639 HK)</a> earnings for FY23. We expect revenue /profit growth of -15%/12% YoY with H2FY23 revenue/profit -1.7%/2.3% YoY due to lower coking coal prices.</li>
<li>We expect the company to pay an FY23 dividend of 36 HKD cents, implying an 11.3% yield. At the current spot price, the implied yield is 11.3%. </li>
<li>The company's balance sheet is rich in cash, with more than a billion USD (~50% of market capitalization). However, we are skeptical that the company will pay big special dividends. </li>
</ul>


We preview Shougang Fushan Resources (639 HK) earnings for FY23. We expect revenue /profit growth of -15%/12% YoY with H2FY23 revenue/profit -1.7%/2.3% YoY due to lower coking coal prices.
We expect the company to pay an FY23 dividend of 36 HKD cents, implying an 11.3% yield. At the current spot price, the implied yield is 11.3%. 
The company's balance sheet is rich in cash, with more than a billion USD (~50% of market capitalization). However, we are skeptical that the company will pay big special dividends. 


Shougang Fushan Resource (639 HK): FY23 Earnings, 11% Dividend Yield With ~50% of Mkt Cap in Cash

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shougang-fushan-resources-group-ltd" target="_blank" data-smartkarma-citation="entities:19494:1" rel="noopener">Shougang Fushan Resources (639 HK)</a> experienced a decline of 23% YoY in NPAT for H1 2023 despite coal prices falling 22% YoY due to improved coking coal recovery rates. </li>
<li>Gross cash and Investments totaled 9.4 bn HKD. Netting the dividend/tax payable and buyback of 1.4/0.4/0.3 bn HKD, net cash is 7.3 bn (60% of mktcap) and growing. </li>
<li>We estimate a dividend payment of 32 cents (13% yield) for FY23e; H1 FY23 dividend payment was 10 cents ( H1 FY22: 15 cents  FY22: 43 cents).</li>
</ul>



Shougang Fushan Resources (639 HK) experienced a decline of 23% YoY in NPAT for H1 2023 despite coal prices falling 22% YoY due to improved coking coal recovery rates. 
Gross cash and Investments totaled 9.4 bn HKD. Netting the dividend/tax payable and buyback of 1.4/0.4/0.3 bn HKD, net cash is 7.3 bn (60% of mktcap) and growing. 
We estimate a dividend payment of 32 cents (13% yield) for FY23e; H1 FY23 dividend payment was 10 cents ( H1 FY22: 15 cents  FY22: 43 cents).


Shougang Fushan: Efficiency Gains Help H1 2023, Cash ~60% of Mkt Cap, FY23 Yield 13%

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shougang-fushan-resources-group-ltd" target="_blank" data-smartkarma-citation="entities:19494:1" rel="noopener">Shougang Fushan Resources (639 HK)</a> energy, a pure play on high coking coal prices, now trades at 5.7x FY24 PE (1.5x EV-EBITDA), assuming 2,200 RMB/ton prices (vs spot 2500). </li>
<li>The company has ~7.5 bn HKD of net cash (on H12023), representing 50% of the market cap despite conducting a recent buyback of 5% and paying all its outstanding dividends/taxes. </li>
<li>With an 80% payout, we can also expect a dividend yield of 14% for FY24 if prices average 2200 RMB/ton.  </li>
</ul>



Shougang Fushan Resources (639 HK) energy, a pure play on high coking coal prices, now trades at 5.7x FY24 PE (1.5x EV-EBITDA), assuming 2,200 RMB/ton prices (vs spot 2500). 
The company has ~7.5 bn HKD of net cash (on H12023), representing 50% of the market cap despite conducting a recent buyback of 5% and paying all its outstanding dividends/taxes. 
With an 80% payout, we can also expect a dividend yield of 14% for FY24 if prices average 2200 RMB/ton.  


Fushan Energy: Coking Coal Prices High and Dividend Yield >10% with ~50% of Mkt Cap in Cash

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shougang-fushan-resources-group-ltd" target="_blank" data-smartkarma-citation="entities:19494:1" rel="noopener">Shougang Fushan Resources (639 HK)</a> has launched a partial offer to acquire a maximum of 125.0m shares (2.47% of outstanding) at HK$2.40 per share, a 17.6% premium to the undisturbed price.</li>
<li>The partial offer is conditional on approval by more than 50% of disinterested shares and the shareholder approval of the whitewash waiver. There is no minimum acceptance condition.</li>
<li>The 2020 partial offer, which was at a 9.3% premium to the undisturbed price and -17% below the current offer, was overwhelmingly approved. Therefore, the current offer should be approved.  </li>
</ul>



Shougang Fushan Resources (639 HK) has launched a partial offer to acquire a maximum of 125.0m shares (2.47% of outstanding) at HK$2.40 per share, a 17.6% premium to the undisturbed price.
The partial offer is conditional on approval by more than 50% of disinterested shares and the shareholder approval of the whitewash waiver. There is no minimum acceptance condition.
The 2020 partial offer, which was at a 9.3% premium to the undisturbed price and -17% below the current offer, was overwhelmingly approved. Therefore, the current offer should be approved.  


Shougang Fushan Resources (639 HK): Partial Offer at HK$2.40

<ul>
<li>
<a href="https://www.smartkarma.com/entities/mount-gibson-iron-ltd" target="_blank" data-smartkarma-citation="entities:19043:1" rel="noopener">Mount Gibson Iron (MGX AU)</a> is a pure play on iron ore trading at 0.5x EV-EBITDA, with 77% of the market capitalization in cash in H1 FY24 (likely to grow).</li>
<li>The company is about to announce reinstating its dividend, and a 50% payout could result in a yield of 20% on the current share price. </li>
<li>The company's main catalyst is its earnings release in August, after which a board meeting will decide on future dividends (which it has already committed to shareholders). </li>
</ul>



Mount Gibson Iron (MGX AU) is a pure play on iron ore trading at 0.5x EV-EBITDA, with 77% of the market capitalization in cash in H1 FY24 (likely to grow).
The company is about to announce reinstating its dividend, and a 50% payout could result in a yield of 20% on the current share price. 
The company's main catalyst is its earnings release in August, after which a board meeting will decide on future dividends (which it has already committed to shareholders). 


Mount Gibson (MGX AU): Iron Ore Pure Play, 77% of the Mkt Cap in Cash, 0.5x EV-EBITDA With Catalysts

Hong Kong

Shougang Fushan Resources Group Ltd. produces and sells coking coal products and side products in China. The Company is principally engaged in mining of coking coal and production and sales of raw and clean coking coal,

Shougang Fushan Resources (639 HK)

Shougang Fushan Resource (639 HK): FY23 Earnings, 11% Dividend Yield With ~50% of Mkt Cap in Cash

We summarize our expectations for 639 HK ( Shougang Fushan Resources ). The stock trades at an 11.3% dividend yield on our estimated FY23 earnings...

Sameer Taneja

Shougang Fushan: Efficiency Gains Help H1 2023, Cash ~60% of Mkt Cap, FY23 Yield 13%

Shougang Fushan Resources (639 HK) is a cheap stock. It trades at 6x PE and 1.4x EV-EBITDA with a potentially 13% yield for FY23e. We review its H1...

Sameer Taneja

Fushan Energy: Coking Coal Prices High and Dividend Yield >10% with ~50% of Mkt Cap in Cash

Shougang Fushan Resources (639 HK) energy, a pure play on high coking coal prices, now trades at 5.7x FY24 PE (1.5x EV-EBITDA), assuming 2,200 RMB...

Sameer Taneja