Fortescue Metals Group posted a bumper FY20 result, while surprising with a $1.00 per share dividend, which was 4% ahead of Morgans estimate.
A 27% increase in revenue was driven by strong shipments and iron ore prices, along with a suppression of cash costs below consensus levels. According to the broker, this saw earnings (EBITDA) margins expand to 65% (from 61%) in FY20, with net debt reduced to near zero.
Underlying earnings (EBITDA) and profit (NPAT) were in-line with consensus.
After the result, and mark-to-market on iron ore prices, the broker’s EPS estimate for FY21 has increased 25%.
The Hold rating is maintained. The target price is increased to $13.60 from $13.
Sector: Materials.
Target price is $13.60.Current Price is $18.60. Difference: ($5.00) – (brackets indicate current price is over target). If FMG meets the Morgans target it will return approximately -37% (excluding dividends, fees and charges – negative figures indicate an expected loss).
