Fortescue Metals Group Ltd (FMG)



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General Information
Company Name: Fortescue Metals Group Ltd
Stock Code: FMG
Website: www.fmgl.com.au
GICS Sub-Industry: Steel
Market Cap ($M): 11,708
Equiv. Shares (M): 3,114

Current Price Data+
Current Price Open High Low Last Close Volume Price Movement
 $ 3.760 $ 3.880 $ 3.905 $ 3.750 $ 3.930 25,325,773 $ -0.170  -4.326 %

Current Broker Consensus Recommendation more
Recommendation: Hold (2.5)
Recommendation Date: 18th Sep 2014
Brokers Surveyed: 6

Company Overview

Business Description:
Fortescue Metals Group Ltd (FMG) is an iron ore production and exploration company with assets located in the Pilbara region of Western Australia. FMG currently holds reserves of 2.34 Bt of hematite ore within its operating Chichester and Solomon Hubs, with FY13 total ore mined and ore shipment of 94.6Mt and 80.9Mt respectively. Total resource base currently stands at 15.6Bt from both operating and development properties.

Strategy Analysis:
Fortescue's goal is to become a low cost iron ore miner in the Pilbara region of WA. From an initial base of 40 million tonnes a year, the company expanded to 55 million tonnes a year in fiscal 2012. The next planned step is to 155 million tonnes at a cost of just over USD 10 billion including the new mining fleet. Fortescue aims to exit December 2013 at a production rate of 155 million tonnes per annum. Further expansions beyond 155 million tonnes will be considered but Fortescue aims to strengthen its balance sheet before undertaking any significant new capital expenditure. Fortescue Metals Group reported NPAT down 40% to US$478.0m for the half-year ended 31 December 2012. Revenues from ordinary activities were US$3.3bn, down 2% from the same period last year. Diluted EPS was 15.35 US cents compared to 25.71 US cents last year. Net operating cash flow was US$479.0m compared to US$1.19bn last year. No dividend was declared. FY13 guidance of total shipped tonnes remains between 82wMt and 84wMt. Solomon's Firetail mine is now expected to achieve a 20Mtpa run rate during April 2013 after a severe rain event caused a minor delay in construction. This will increase the company's production capacity to 115Mtpa.


Financial Summary
Year to Jun NPAT EPS EPS chg (%) PER DPS Yield (%) Franking (%)
2016  F 1,784.1 56.9 -15.5 6.6 25.0 6.6 100.0
2015  F 2,110.1 67.4 -27.3 5.6 25.0 6.6 100.0
2014  A 2,888.2 92.6 84.6 5.3 20.0 4.1 100.0
Source: Morningstar analyst estimates.

Peer Comparison
EPS Growth (%) P/E (%) Dividend Yield (%)
Company Mkt Cap 2014 A 2015 F 2016 F 2014 A 2015 F 2016 F 2014 A 2015 F 2016 F
Arrium (ARI) $546 M -0.6786 -0.8381 0.9380 1.6729 10.3359 5.3333 19.55 5.00 7.50
BlueScope Steel (BSL) $3,171 M -- 1.8208 0.2845 51.8282 18.3733 14.3037 0.00 0.79 1.94
Fortescue Metals (FMG) $12,237 M 0.7497 -0.3745 -0.0898 4.2140 6.7375 7.4025 5.40 5.52 5.26
Independence Group (IGO) $1,000 M 1.6367 0.7459 0.0335 15.8148 9.0581 8.7644 1.87 2.86 3.12
Mount Gibson Iron (MGX) $654 M 0.0351 -- -- 6.7950 -- -- 6.67 6.67 6.67

Market Comparison
Earnings P/E Ratio P/B Ratio P/E Growth P/S Ratio
FMG 0.38 4.40 1.46 10.00 0.94
Market 0.94 15.7 1.29 1.73 1.56
Sector 0.71 11.7 0.71 0.98 5.00

Directors
Name Position Start Date
Mr Nev Power Chief Executive Officer,Executive Director 01 September 2011
Mr Peter Meurs Executive Director 22 February 2013
Mr Graeme Rowley Executive Director,Non-Executive Director 17 October 2003
Mr Herbert James Elliott Non-Executive Chairman,Non-Executive Deputy Chairman 17 October 2003
Mr Owen Hegarty Non-Executive Director 13 October 2008
Mr Mark Bradley Barnaba Non-Executive Director 19 February 2010
Mr Herbert (Bud) Scruggs Non-Executive Director 26 August 2011
Ms Elizabeth Gaines Non-Executive Director 22 February 2013
Dr Geoffrey (Geoff) Raby Non-Executive Director 18 August 2011
Mr Cao Huiquan Non-Executive Director 27 February 2012
Ms Sharon Warburton Non-Executive Director 13 November 2013
Mr John (Andrew) Andrew Henry Forrest Non-Executive Director,Non-Executive Chairman 18 August 2011

Management
Name Position
Stephen Pearce Chief Financial Officer
Mark Thomas Company Secretary

Substantial Shareholders
Holding Name
1,020,690,915 (32.78%) The Metal Group Pty Ltd
458,405,492 (14.72%) Hunan Valin Group

Calendar of Events
Date Event
15 September 2015 Report (Annual)
19 August 2015 Report (Prelim)
15 July 2015 Report (Quarterly)
15 April 2015 Report (Quarterly)
18 February 2015 Report (Interim)
29 January 2015 Report (Quarterly)
12 November 2014 AGM
16 October 2014 Report (Quarterly)
03 October 2014 Div Pay Date
23 September 2014 Report (Annual)
© 2011 Morningstar, Inc. All rights reserved. The data and content contained herein are not guaranteed to be accurate, complete or timely. Neither Morningstar, nor its affiliates nor their content providers will have any liability for use or distribution of any of this information. To the extent that any of the content above constitutes advice, it is general advice that has been prepared by Morningstar Australasia Pty Ltd ABN: 95 090 665 544, AFSL: 240892 (a subsidiary of Morningstar, Inc.), without reference to your objectives, financial situation or needs. Before acting on any advice, you should consider the appropriateness of the advice and we recommend you obtain financial, legal and taxation advice before making any financial investment decision. If applicable investors should obtain the relevant product disclosure statement and consider it before making any decision to invest. Some material is copyright and published under licence from ASX Operations Pty Limited ACN 004 523 782 ("ASXO"). DISCLOSURE: Employees may have an interest in the securities discussed in this report. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/fsg.asp.

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