The recent booming demand in the metals and mining sector has helped the miners to a large extent. With the iron ore fetching US $70.74 used in steel making, the price for iron ore is remining unchanged which benefits the companies operating in the iron ore business. With global crude steel production forecast to grow, two stocks in this sector which have been interesting in the recent time are as follows:
FORTESCUE METALS GROUP LTD (ASX: FMG) – The company’s focus has been on Fe grade and mills drive for productivity with high steel margins during 2018. It benefits from the steel demand driven from China with strong real estate and to further encourage consumption of lower Fe iron ore is the recent steel mill margin compression expected. The Sept’18 quarter average realised price increased 12.5% vs 2% for the Platts 62% index due to increased Fortescue blend shipments, production of Fortescue lump, educed super special fines and other marketing initiatives. Strong customer interest in WPF, joint test work programs, maiden shipments agreed with key customers and clear pathway to long term offtake agreements are further strengthening Fortescue’s product portfolio. Also, the company is making sustainable cost improvements and efficient operations. The net gearing of the company for FY 18 is 24 percent and net debt to underlying EBITDA ratio is 1x. The stock has a P/E of 10.720 and an EPS of 0.382 AUD reflects that the company has decent valuations. The stock price has gone marginally down by -1.467% to trade at $4.030 due to an inline production.
BHP GROUP LIMITED (ASX: BHP) – The company has declared a dividend distribution date with dividend ex-date of January 01, 2019 and dividend pay date as January 30, 2019 as much as 141.805c. The company with a portfolio focused on high quality assets in the right commodities is now simpler and with a robust balance sheet, which gives us more financial flexibility is stronger and through a relentless focus on safety and productivity is more efficient. Also, with a rigorous and transparent capital allocation process the company strives to be more disciplined. Through transactions totalling US$10.8 billion, payable in cash BHP announced the sale of their Onshore US petroleum assets and from this US Onshore divestment the company announced return of US$10.4 billion. This year the company has reduced net debt by more than US$5 billion to US$10.9 billion. The stock has a P/E of 34.640 and an EPS of 0.942 AUD reflects that the company has decent valuations among its peers. The stock price has gone up by 2.269% to trade at $33.360 due to positive financials with dividends and a world class portfolio.
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