SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

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Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.</strong>&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
<h2>FORTRESS MINERALS LTD.</h2>
<h3>Rise of an iron-ore producer</h3>
<div>
<div>
<div>
<div>
<ul>
<li>Growing demand from steel mills in Malaysia to spur higher sales volumes. We project 54% volume growth from FY20 to FY22e.</li>
<li>Low production cost of US$28.81/WMT. Reserves to expand with only 5% of its mining concession area explored so far.</li>
<li>Initiate coverage with BUY and TP of S$0.28. Valued at 11x FY21e PE, in-line with industry average. Fortress is smaller in size but is growing faster and enjoy higher returns than industry.</li>
</ul>
<p><strong>Company Background<br></strong>Fortress Minerals (FML) is an iron ore concentrate producer in Malaysia. As FY2019 was the Group’s maiden year of commercial production, profitability margins were partly crimped by initial ramp-up costs and gestation. Its mining concession is located in Bukit Besi, Terangganu, Malaysia, with 7.18MT of reserves and 13 years of concession life.</p>
<p>FML explores, mines, produces and sells magnetite iron-ore concentrate. Steel is the world’s most commonly used metal and iron ore is a key ingredient in steel-making. FML sells primarily to steel mills in Malaysia and China.</p>
<div>
<div>
<div>
<div>
<p><strong>Investment Merits</strong></p>
<div>
<div>
<div>
<div>
<ol style="list-style-type: decimal;">
<li>
<p>Healthy volume growth of 40% expected in FY21e to meet construction demand.<br>1HFY21 production volume surged 57% YoY to 231,007 WMT. Demand was driven by new offtake agreements with steel mills in Malaysia. We expect FML to increase production by 54% from FY20 to FY22e. Malaysia’s 9M2020 production of iron and steel bars and rods grew 5.5% YoY. On the basis of projected GDP growth of 6.5%-7.5% and construction-sector growth of 13.9% in 2021, demand for steel and iron ores is expected to increase.</p>
</li>
<li>
<p>High profitability due to low-cost structure and proximity to customers. Unit cost of US$28.8/WMT against ASPs of US$95.9/DMT yielded gross profit margins of 66.7% of (industry average of about 50%) in FY20. Another advantage FML has is the close proximity of its Bukit Besi mine – of about 100km – to domestic steel-mill customers. The quality of its iron ores (TFe grade of 65.0%), consistent supply and short delivery time are expected to ensure captive buyers from steel mills in Malaysia. Iron ores from Australia require a delivery time of about 10-20 days vs. daily trucking services in Malaysia.</p>
</li>
<li>
<p>Considerable exploration upside potential with 5% of concession area explored. FML completed its plant expansion in late FY2020. Of its concession area of 526.2 ha at Bukit Besi, less than 5% has been explored. There is thus substantial potential for mining as larger tracts are explored. FML’s mining rights will only expire in early 2033.</p>
</li>
</ol>
<p>We initiate coverage with a BUY rating and TP of S$0.28. Our TP is based on 11x FY21e PE, in-line with industry average.</p>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>

Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.
FORTRESS MINERALS LTD.
Rise of an iron-ore producer





Growing demand from steel mills in Malaysia to spur higher sales volumes. We project 54% volume growth from FY20 to FY22e.
Low production cost of US$28.81/WMT. Reserves to expand with only 5% of its mining concession area explored so far.
Initiate coverage with BUY and TP of S$0.28. Valued at 11x FY21e PE, in-line with industry average. Fortress is smaller in size but is growing faster and enjoy higher returns than industry.

Company Background Fortress Minerals (FML) is an iron ore concentrate producer in Malaysia. As FY2019 was the Group’s maiden year of commercial production, profitability margins were partly crimped by initial ramp-up costs and gestation. Its mining concession is located in Bukit Besi, Terangganu, Malaysia, with 7.18MT of reserves and 13 years of concession life.
FML explores, mines, produces and sells magnetite iron-ore concentrate. Steel is the world’s most commonly used metal and iron ore is a key ingredient in steel-making. FML sells primarily to steel mills in Malaysia and China.




Investment Merits






Healthy volume growth of 40% expected in FY21e to meet construction demand. 1HFY21 production volume surged 57% YoY to 231,007 WMT. Demand was driven by new offtake agreements with steel mills in Malaysia. We expect FML to increase production by 54% from FY20 to FY22e. Malaysia’s 9M2020 production of iron and steel bars and rods grew 5.5% YoY. On the basis of projected GDP growth of 6.5%-7.5% and construction-sector growth of 13.9% in 2021, demand for steel and iron ores is expected to increase.


High profitability due to low-cost structure and proximity to customers. Unit cost of US$28.8/WMT against ASPs of US$95.9/DMT yielded gross profit margins of 66.7% of (industry average of about 50%) in FY20. Another advantage FML has is the close proximity of its Bukit Besi mine – of about 100km – to domestic steel-mill customers. The quality of its iron ores (TFe grade of 65.0%), consistent supply and short delivery time are expected to ensure captive buyers from steel mills in Malaysia. Iron ores from Australia require a delivery time of about 10-20 days vs. daily trucking services in Malaysia.


Considerable exploration upside potential with 5% of concession area explored. FML completed its plant expansion in late FY2020. Of its concession area of 526.2 ha at Bukit Besi, less than 5% has been explored. There is thus substantial potential for mining as larger tracts are explored. FML’s mining rights will only expire in early 2033.


We initiate coverage with a BUY rating and TP of S$0.28. Our TP is based on 11x FY21e PE, in-line with industry average.













(Non-SGX Report) FORTRESS MINERALS LTD:  Rise of an Iron-Ore Producer

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX</strong>.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
<div>
<div>
<div>
<div>
<h2>FORTRESS MINERALS LTD.</h2>
<h3>Rise of an iron-ore producer</h3>
</div>
</div>
</div>
</div>
<div>
<div>
<div>
<div>
<ul>
<li>Growing demand from steel mills in Malaysia to spur higher sales volumes. We project 54% volume growth from FY20 to FY22e.</li>
<li>Low production cost of US$28.81/WMT. Reserves to expand with only 5% of its mining concession area explored so far.</li>
<li>Initiate coverage with BUY and TP of S$0.28. Valued at 11x FY21e PE, in-line with industry average. Fortress is smaller in size but is growing faster and enjoy higher returns than industry.</li>
</ul>
<div>
<div>
<div>
<div>
<p><strong>Company Background</strong></p>
<p>Fortress Minerals (FML) is an iron ore concentrate producer in Malaysia. As FY2019 was the Group’s maiden year of commercial production, profitability margins were partly crimped by initial ramp-up costs and gestation. Its mining concession is located in Bukit Besi, Terangganu, Malaysia, with 7.18MT of reserves and 13 years of concession life.</p>
<p>FML explores, mines, produces and sells magnetite iron-ore concentrate. Steel is the world’s most commonly used metal and iron ore is a key ingredient in steel-making. FML sells primarily to steel mills in Malaysia and China.</p>
<p><strong>Investment Merits</strong></p>
<p><strong>Healthy volume growth of 40% expected in FY21e to meet construction demand.</strong></p>
<ul>
<li>1HFY21 production volume surged 57% YoY to 231,007 WMT. Demand was driven by new offtake agreements with steel mills in Malaysia. We expect FML to increase production by 54% from FY20 to FY22e. Malaysia’s 9M2020 production of iron and steel bars and rods grew 5.5% YoY. On the basis of projected GDP growth of 6.5%-7.5% and construction-sector growth of 13.9% in 2021, demand for steel and iron ores is expected to increase.</li>
<li>High profitability due to low-cost structure and proximity to customers. Unit cost of US$28.8/WMT against ASPs of US$95.9/DMT yielded gross profit margins of 66.7% of (industry average of about 50%) in FY20. Another advantage FML has is the close proximity of its Bukit Besi mine – of about 100km – to domestic steel-mill customers. The quality of its iron ores (TFe grade of 65.0%), consistent supply and short delivery time are expected to ensure captive buyers from steel mills in Malaysia. Iron ores from Australia require a delivery time of about 10-20 days vs. daily trucking services in Malaysia.</li>
<li>Considerable exploration upside potential with 5% of concession area explored. FML completed its plant expansion in late FY2020. Of its concession area of 526.2 ha at Bukit Besi, less than 5% has been explored. There is thus substantial potential for mining as larger tracts are explored. FML’s mining rights will only expire in early 2033.</li>
</ul>
<p>We initiate coverage with a BUY rating and TP of S$0.28. Our TP is based on 11x FY21e PE, in-line with industry average.</p>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>

Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.




FORTRESS MINERALS LTD.
Rise of an iron-ore producer









Growing demand from steel mills in Malaysia to spur higher sales volumes. We project 54% volume growth from FY20 to FY22e.
Low production cost of US$28.81/WMT. Reserves to expand with only 5% of its mining concession area explored so far.
Initiate coverage with BUY and TP of S$0.28. Valued at 11x FY21e PE, in-line with industry average. Fortress is smaller in size but is growing faster and enjoy higher returns than industry.





Company Background
Fortress Minerals (FML) is an iron ore concentrate producer in Malaysia. As FY2019 was the Group’s maiden year of commercial production, profitability margins were partly crimped by initial ramp-up costs and gestation. Its mining concession is located in Bukit Besi, Terangganu, Malaysia, with 7.18MT of reserves and 13 years of concession life.
FML explores, mines, produces and sells magnetite iron-ore concentrate. Steel is the world’s most commonly used metal and iron ore is a key ingredient in steel-making. FML sells primarily to steel mills in Malaysia and China.
Investment Merits
Healthy volume growth of 40% expected in FY21e to meet construction demand.

1HFY21 production volume surged 57% YoY to 231,007 WMT. Demand was driven by new offtake agreements with steel mills in Malaysia. We expect FML to increase production by 54% from FY20 to FY22e. Malaysia’s 9M2020 production of iron and steel bars and rods grew 5.5% YoY. On the basis of projected GDP growth of 6.5%-7.5% and construction-sector growth of 13.9% in 2021, demand for steel and iron ores is expected to increase.
High profitability due to low-cost structure and proximity to customers. Unit cost of US$28.8/WMT against ASPs of US$95.9/DMT yielded gross profit margins of 66.7% of (industry average of about 50%) in FY20. Another advantage FML has is the close proximity of its Bukit Besi mine – of about 100km – to domestic steel-mill customers. The quality of its iron ores (TFe grade of 65.0%), consistent supply and short delivery time are expected to ensure captive buyers from steel mills in Malaysia. Iron ores from Australia require a delivery time of about 10-20 days vs. daily trucking services in Malaysia.
Considerable exploration upside potential with 5% of concession area explored. FML completed its plant expansion in late FY2020. Of its concession area of 526.2 ha at Bukit Besi, less than 5% has been explored. There is thus substantial potential for mining as larger tracts are explored. FML’s mining rights will only expire in early 2033.

We initiate coverage with a BUY rating and TP of S$0.28. Our TP is based on 11x FY21e PE, in-line with industry average.









(Non-SGX Report) FORTRESS MINERALS LTD: Rise of an Iron-Ore Producer

Malaysia

Fortress Minerals Limited mines, processes, and distributes iron ore. The Company focuses on exploration, mining, production, and distribution of iron ore concentrates. Fortress Minerals serves customers in Singapore and Malaysia.

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Fortress Minerals Ltd (FMIL SP)

(Non-SGX Report) FORTRESS MINERALS LTD: Rise of an Iron-Ore Producer

Non- SGX Report: These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external...

Singapore Exchange Ltd (SGX)

(Non-SGX Report) FORTRESS MINERALS LTD: Rise of an Iron-Ore Producer

Non- SGX Report: These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external...

Singapore Exchange Ltd (SGX)

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