We take a look and see if Fortescue Metals ASX (FMG ASX) is the Most Profitable Mining Company 2020. Fortescue’s Vision: To be the safest, lowest cost and most profitable mining company.
Fortescue Metals ASX Fundamentals
Fortescue Metals at the time of publishing has the below fundamentals:
- Market Cap: AUD $35.1Billion
- Net Profit After Tax: US 3.2Billion
- P/E: 7.8
- Forward P/E: 6.76
- Dividend Yield: 6.9%
- 52 Week Range: 4.58 – 11.92
- Book Value: $4.90
- Debt: 27%
FMG ASX Increasing Revenue Yearly
From the Annual Reports FMG ASX has been increasing revenues YOY from 2018 – 2019 by ~40%. However, it is worth noting that 2017-2018 actually was a slight decline. This would provide a good insight into what operating environment impacts FMG. Looking into the 2018 annual report revenue decrease form FY17-FY18 mainly due to the average iron ore price decreasing by 18% for that year. Over FY17-FY18 underlying net profit was 1.1billion.
Long Term Debt has stayed consistent at 5.5billion. As per the FY18 media statement FMG was the lowest cost supplier of sea-born iron ore to China.
Price at date of FY19 annual report ~$8.00, the latest price sensitive announcement has been a quarterly production report provided on the 24th of Oct at which price was ~9.00. Since the last price sensitive announcement FMG has reached a peak of $11.92 per share or an increase of 25%. In this time we have seen the iron ore price increase 15% and coal remain fairly constant.
It’s worth noting that as the current FMG has a Net Tangible Assets per share of $4.60. Furthermore the nature of the business is cyclical and highly linked to commodity prices.
In FY2019 Fortescue shipped a massive 167.7mt of product and produced a massive net profit after tax of US$3.2 billion.
Is FMG the Highest Profitable Mining Company
This is a little hard to answer however, data from PwC’s mine report shows the net profit margin for the worlds top 40 mining companies by market cap. Fortescue metals by comparison provided an Underlying EBIDTA margin of 61% and 46% in 2019 and 2018 respectively. This is a massive achievement by any means.
Message from the CEO Twiggy Forest
From the FY2019 Annual Report Twiggy Forest Mentions: High capital and high yield growth – it is incredibly rare for a company, let alone one operating in the resources sector, to occupy both spaces. The fact that Fortescue has successfully done so is thanks to the values we hold as a family globally – our character, determination, humility, innovation, enthusiasm, frugality and commitment.
Twiggy is clearly very proud of how well the business is performing and from the above features both high capital and high yield growth.
Fortescue Metals ASX Technical
See below chart of FMG, RIO and BHP (Peer’s of FMG)
From the above it can be observed FMG has outpaced peers by over 15% over a six month period. This is slightly worrying providing peers provide similar exposure to FMG base commodities. Although on the counter FMG is trading on a p/e of 7.8 vs approx. 14 for BHP and RIO.
FMG is trading at the top of its BB range and MACD is pointing upwards. This suggests a continuation of the current trend. If 200DMA is broken or the 11.00$ b/o level it would prompt a re-assessment.
Prophet Is Buying FMG Metals Shares at the current Share Price of $11.83 and will hold until the upwards trend line is broken. FMG in our opinion is an attractive business at an attractive price and we see further upside here. FMG Share Price
If your buying FMG for the dividends, check out our Understanding Share Taxation and Dividends Article Here.
We are not qualified investment professionals and cannot give specific investment advice. This information is opinion only. It is not intended as financial advice. Prophet is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information contained in this article. Please do your own research. Some information may be out-of-date or inaccurate.
-This is opinion only. This is not investment advice-Prophet Invest
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