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Ferrexpo Share Discussion Threads
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|It is thanks to share chat sites like this that novice investors can hold firm through stomach churning volatility and take the profits that experienced investors know to wait for.|
|Erm, this is a high beta share so I would expect some stomach churning moments with this. A lot of weak holders will be shaken out. But the trend is now up.|
|Was preparing, as long term holder, to weather three straight down days on this one. Looks like I won't have to. Fasten your seatbelts :-)|
|Nice open, let's see if it is sustained over the first hour.|
|Another interesting angle on Iron Ore prices is the weather. Did you see the reports that there is an unusually high chance of cyclones this season in Western Australia. When this last happened (2011) admittedly there were many other factors at play but the coking coal and iron price peaked. I am not selling Ferrexpo. Friday's 7% drop is literally a drop in the ocean, to be expected after such a big run up. The rise will no doubt continue and patient investors holding through to Spring 2017 will IMO be very richly rewarded.|
|Hi again Granto & spooky
Sorry – I need to correct my share price figures quoted in my above post!
I wrote :-
“At a 4X P/E multiple the share price would be approx £1.3 and at a 6X multiple the share price would be £1.6. For what it is worth, if output was 13m tons at a sale price of $92.5 and a P/E multiple of 6x the share price would be £3+. Wouldn’t that be nice!”
In fact I was mixing up some of my figures and – as an American politician might put it – I “miswrote̶1;.
What I should have written is:-
Using the figures for a sales price of $85 per ton and a 4X multiple the share price would be approx £1.30 and using the sales price of $90 per ton and a 4X multiple the share price would be approx £1.60.
In addition if a multiple of 6X is used the share price figures would be (obviously!) 1.5x the amount the figures for the 4X multiple – i.e. approx £1.95 and £2.40 respectively.
Again – Doh!
Personally, I believe that a 4X multiple rather than say 6X or higher is justifiable given that the outlook for iron ore is still regarded by most analysts as being distinctly negative. Also, whilst I feel comfortable about the debt management issue I can understand that “The Market” will want to see evidence via the upcoming results – and possibly/probably refinancing of the bonds. Should performance remain positive into 2017 and the iron ore market remain above say $50 per ton I could envisage that multiple moving towards 6X.
So, I am surprised by the current level of the share price – but I hope that we will move higher (much higher would be nice!) as we move into and through 2017.
Now – off to the naughty corner!!!
|JJHBev - Great post.|
Not long winded at all, short posts have little meaning here. I like what you wrote as it shows you have a good grasp of the company. I will come back later and comment in-depth.|
I read your posts over on LSE with great interest (but I am not registered there & therefore do not post there myself). I must say that I do like your input as it is both reasoned and balanced i.e risks highlighted as well as potential upsides.
As regards your question re Fxpo valuation here are my somewhat long winded thoughts!
I continue to see a lot of upside BUT with significant risks attached. Personally I had not expected the share price to be anywhere near its current level until the early part of next year and then only if the iron ore base price was remaining north of $50. So, to be here in mid Oct is IMO pretty darn bullish. Having said that, the iron ore price dynamics including the pellet premium demand (with the situation of Samarco v local authorities becoming more adversarial) do currently support the share price – including the possibility of further significant upside.
I think it is worth remembering how things have changed for Fxpo this year. Looking back only six/nine months Fxpo was facing IMO three major risks:-
1 The iron ore price scenario – including low pellet premiums and forecast of prices continuing around $40 or even less!
2 Mad Vlad – the risk of expansion of the turmoil in the East. Whilst Poltava would not be affected other than in all out war there could have been (and still could be) major disruption around some of the port areas used by Fxpo. There would also be major sentiment issues affecting the share price
3 The debt burden. The size of the debt and its short term nature represented a huge problem when measured against market conditions in the first quarter of this year.
IMO risks 1 & 3 justified the share price level in the first quarter of this year but not as we moved through the second quarter. Now, I believe that we are very close to a situation where the debt risk is close to being eliminated from that list even if iron ore prices do reduce quite significantly. Given the market conditions from mid year and the cash that will have been generated I believe that cash at year end should be well in excess of $100m even after further debt repayments of $62m.
Debt principal repayments due in 2017 total $200m. IMO these are easily serviceable from the level of cash I believe the company will have and the level of cash it should be generating. As regards cash generation it is worth remembering that EBITDA for the first half of 2016 – which included the utterly dire Q1 – was $160m. For the current half year, subject always to Nov/Dec performance, I believe the figure should be $75m+++ higher. The bonds falling due after 2017 should be refinanced and with debt to EBITDA probably below 1.5X these should be straightforward to refinance at much lower cost.
So – I believe that the debt burden is already substantially downrisked and that this will become clear after the results in the first quarter of 2017.
It also appears to be the case that – as a premium pellet producer - Fxpo is insulated from some of the potential downside risks re iron ore prices. Fxpo achieved an average sale price per ton of $76 for the first half. Indications are that it has so far probably achieved $95+ for the second half
Now – finally! – moving to my guesstimate of value.
I believe that if Fxpo achieves $90 per ton of pellets & 11.5m tons of production it should achieve a net profit of $275m+. To be clear, this is profit as reported in the statutory accounts and is after all costs including interest and tax. At $85 per ton that net profit figure drops to $230m. I hope that the tonnage of production for 2017 will in fact be in excess of 12m but, after the recent production update, I am being conservative. Should higher output be achieved – and there are strong indications of the ability to quickly achieve brownfield expansion of 1 – 2m tons pa – then the bottom line impact is very significant (particularly because the marginal costs of the extra production is so low)
At a 4X P/E multiple the share price would be approx £1.3 and at a 6X multiple the share price would be £1.6. For what it is worth, if output was 13m tons at a sale price of $92.5 and a P/E multiple of 6x the share price would be £3+. Wouldn’t that be nice!
So, sorry to be so long winded, but in summary I think that the Deutsche Bank figure of £1.3 makes a heck of a lot of sense but that each day/week/month of output with prices at current levels moves that figure to between £1.5 and £2. BUT significant risks do remain so, as always, DYOR!
|Run your winners and buy the dips.|
|A lovey time to take profits here imoI took mine a bit too soon yesterday @105p when my trailing stop got triggered on that crazy 104-113 morning spread yesterday ... Doh! Still 25% in a few days makes me happy!Remember bulls and bears make money - Greedy little piggies get slaughtered!|
|1.50/1.70 near term.Also very jittery about how the world markets would view a president Clinton, but worse a president Trump! I can see a huge dow drop it he makes it in, or even if there is a hint he is ahead on the day after polling day.|
|this is impressive stuff. Shame its always been one of my smaller holdings ...|
|MrE - in and out all the way up from 20's
Not falling in love with it|
|I'm in just jittery about the overall market that's all - converted a lot of stocks to cash just in case - old enough to remember 2000 - put it that way|
|Hmm, looks like a lot want in but missed the boat.|
|Past infidelity may also limit the valuation|
|Add into the equation a decent market correction / crash once Hillary is crowned !|
|I wonder what discount to valuation we should apply for the political risk?
Ive always said to my self that what ever happens, they still have all that iron in the ground, and the share price has a very strong correlation to iron ore price, so long as iron ore price stays some where close to where it is now 120/140p would seem a decent share price .
Im in at an ave price of 61p and happy to run for the long term waiting a few years for 250p then ill cash out.|
|Granto....cheers for you insight....one for you for future......sou. more legs in thus one and the other is boo. Lots more legs in this one. I have out in my sell at 140, see what happens between now and then.|
|130-140 ish still looks good before a pullback. Friday has come at the wrong time me thinks though.|
|Charts can be highly misleading, the oldest trick in the book is to put a wall of support below a share price, and pull it !!!|
|where Next? I have no immediate winner. I like to fully understand a business, I like to understand it better than any institutional investor. In Ferrexpo, I think that I did. At investor briefings I knew by the questions the bankers were asking that I knew more than them, a bit like the kid in school who knows he is ahead of the kid asking questions because the questions are behind the game. I don't have a next stop. I will I did. But, I may stick about here and await opportunities. For example, If iron ore crashes badly this winter, there could be panic selling here, and there is the buying chance. .. The last week has been unreal here, I have now take 60% off the table, as I think we are close to the top.|
|granto - agreed - but look at the chart -|