Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

A buy-side analyst with over 15 years of experience investing in Asian markets and specializing in the mid-small cap space, emphasizing value investing in companies with good free cash flows/dividends and long-term holding horizons. 
Exempt Financial Adviser (EFA) under CrossASEAN Research Pte Ltd. 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 Analyst

Fortescue, Short-Term Upside After Going Ex-Dividend

Fortescue Short-Term Better Risk Reward Emerging

Fortescue Metals: More Upside In the Near Term

Fortescue Metals Group: Slight Hiccup from China but Thesis Intact

Fortescue Metals: Iron Ore Stronger for Longer

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

The ascent of the iron ore price was temporarily halted by rhetoric from the Chinese government.  Two key incidents that spooked the market were:<ul>
<li>The Dalian Commodity Exchange ( DCE) capped the trading volumes on the 21st of December for non-brokerage trading participants. The DCE tightened its limits on opening futures positions to 2,000 lots a day for non-brokerage traders from the 22nd of December – further reducing it from a limit of 5,000 lots imposed on December 9, just six days after limits were set at 10,000 lots.</li>
<li>The sentiment was further dampened due to the MIIT (Ministry of Industry and Information Technology) calling on the steel sector to “resolutely” cut crude steel output and ensure an annual drop in 2021.</li>
</ul>We believe that fundamental data and liquidity will be the key factors in deciding the iron ore price direction, so the iron ore price has not been badly affected by this newsflow.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/181/205/original/image_28844845831609973883598.png?1609973887" class="editor-image img-responsive" data-smartkarma-image-id="181205"></figure>Source: SGX, Bloomberg<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>  continues to be our best play in the iron ore space and commands an upside of another 25-30% in the near term as the market continues to digest higher iron ore prices for the near-term. In our insight, on the 4th of December 2020, <a href="https://www.smartkarma.com/insights/fortescue-metals-more-upside-in-the-near-term" target="_blank" data-smartkarma-citation="insights:46020" rel="noopener">Fortescue Metals: More Upside In the Near Term</a>, we elaborate on our rationale for being long. At 140$/ton iron ore price ( Vs. current prices of 165$/ton), Fortescue has a 12% FCF yield. We believe that there could at least be a 10% dividend yield for shareholders.  If iron ore prices hold at 165$/ton spot for longer, the free cash flow yield increases to 15.5%!The risk to our call is :<ol>
<li>Sudden and drastic tightening by the Chinese economy on its property and infrastructure sectors.</li>
<li>The coronavirus resulting in increased lockdowns stalling global steel production from improving.</li>
</ol>You can refer to <a href="https://www.smartkarma.com/insights/fortescue-metals-15-dividend-yield-buybacks-china-stimulus" target="_blank" data-smartkarma-citation="insights:37317" rel="noopener">Fortescue Metals 15% Dividend Yield/Buybacks + China Stimulus</a>, <a href="https://www.smartkarma.com/insights/fortescue-metals-group-slight-hiccup-from-china-but-thesis-intact" target="_blank" data-smartkarma-citation="insights:43782" rel="noopener">Fortescue Metals Group: Slight Hiccup from China but Thesis Intact</a>, <a href="https://www.smartkarma.com/insights/fortescue-metals-iron-ore-stronger-for-longer" target="_blank" data-smartkarma-citation="insights:43095" rel="noopener">Fortescue Metals: Iron Ore Stronger for Longer</a> for more information.

The ascent of the iron ore price was temporarily halted by rhetoric from the Chinese government.  Two key incidents that spooked the market were:
The Dalian Commodity Exchange ( DCE) capped the trading volumes on the 21st of December for non-brokerage trading participants. The DCE tightened its limits on opening futures positions to 2,000 lots a day for non-brokerage traders from the 22nd of December – further reducing it from a limit of 5,000 lots imposed on December 9, just six days after limits were set at 10,000 lots.
The sentiment was further dampened due to the MIIT (Ministry of Industry and Information Technology) calling on the steel sector to “resolutely” cut crude steel output and ensure an annual drop in 2021.
We believe that fundamental data and liquidity will be the key factors in deciding the iron ore price direction, so the iron ore price has not been badly affected by this newsflow.Source: SGX, BloombergFortescue Metals (FMG AU)  continues to be our best play in the iron ore space and commands an upside of another 25-30% in the near term as the market continues to digest higher iron ore prices for the near-term. In our insight, on the 4th of December 2020, Fortescue Metals: More Upside In the Near Term, we elaborate on our rationale for being long. At 140$/ton iron ore price ( Vs. current prices of 165$/ton), Fortescue has a 12% FCF yield. We believe that there could at least be a 10% dividend yield for shareholders.  If iron ore prices hold at 165$/ton spot for longer, the free cash flow yield increases to 15.5%!The risk to our call is :
Sudden and drastic tightening by the Chinese economy on its property and infrastructure sectors.
The coronavirus resulting in increased lockdowns stalling global steel production from improving.
You can refer to Fortescue Metals 15% Dividend Yield/Buybacks + China Stimulus, Fortescue Metals Group: Slight Hiccup from China but Thesis Intact, Fortescue Metals: Iron Ore Stronger for Longer for more information.

Fortescue Metals

Fortescue: Stay for More Upside