Mineral Resources Limited

Slump in mining sector dragging the stock lower:Mineral Resources Limited’s (ASX: MIN) stock price plunged by 5.711 per cent on March 23, 2018 at the back of the market meltdown amidst the impact from trade scenario fuming up between the US and China. On the other hand, revenue (including other income) during 1HFY18 was recorded at $962 Mn vs $786 Mn in 1HFY17, marking a growth of 22% year on year (YoY). EBITDA grew by 25% YoY to $352 Mn in 1HFY18. Reported EBITDA included one-off expenses totalling $102.5 Mn and impairment charges of $56.5 Mn. NPAT stood at $163 Mn in 1HFY18 from $140.3 Mn in 1HFY17. Net cash from operation increased to $221.5 Mn during the same period, up by 69% on pcp. Moreover, the Board of the Directors declared fully franked interim dividend of 25 cents per share for shareholders, and this is an increase of 19% on the interim dividend of 21 cents per share for 2017. The balance sheet at half year end remained in a very strong position with net cash position of A$94 Mn and substantial undrawn debt facilities. The company is well placed to pursue development opportunities. The management guidance on Underlying EBITDA is at >$500 Mn for FY18.Meanwhile, the stock price inclined by 19.36% in the past six months and the same was up by 6.79% in the last five days as on March 22, 2018. The stock still looks “Expensive” at the current market price of $17.50
 

Strong Performance (Source: Company Reports)
 

BHP Billiton Limited

Stock price decline with market meltdown: With the backdrop that Australian goods are exported to China for manufacturing products that may be a subject to proposed US Tariffs, ASX miners were hammered heavily. Basis this, BHP Billiton Ltd (ASX: BHP) was seen to be sliding by 3% on March 23, 2018. Meanwhile, BHP and Woodside have entered into an agreement in relation to the proposed development of the Scarborough gas field. As per the agreement, BHP waived its right of pre-emption and provided its consent to sale by ExxonMobil of its 50% interest in WA-1-R and the Scarborough Joint venture operating agreement to WPL. This will result in WPL holding a 75% interest in Scarborough. After that, Woodside will become the Scarborough operator on completion of the transaction between ExxonMobil and Woodside. Additionally, Woodside also granted BHP the option to purchase an extra 10% stake in Scarborough on the same terms as the XOM deal before the end of 2019. Further, the Scarborough joint venture will now be focussed in finalising the development concept prior to entering FEED and positioning for FID in 2020.

On the other hand, BHP’s board announced to pay an interim dividend of 55 US cents per share (up 38%) that includes an additional amount of 17 cents per share, which is above 50% of the minimum pay-out policy of the company. The management expects that the company is sticking with its strategy of further growth to projected peak steel demand in next decade. That is why, the company is preparing to develop additional 80 Mn mt per year (mpa) South Flank iron ore mine and new blast furnaces at steel mills in India, Vietnam, Malaysia and Indonesia to benefit from demand for the commodity in future. The stock has been up 14.45% in last six months as at March 22, 2018. We give a “Hold” recommendation at the current price of $28.77
 

Iluka Resources Limited

Industry trend still favourable:Down 3.733% on March 23, 2018 with mining sector downturn, Iluka (ASX: ILU) lately reported that Schroder investment Management Australia Limited, changed its holding from 8.70% of interest to 7.11% in Iluka. Then, Mitsubishi UFJ Financial Group, Inc. and Morgan Stanley & its subsidiaries became the substantial holder in March 2018 by holding 26,695,977 of securities with 6.38 per cent of the voting power and 200,000 of options with 0.05 per cent of the voting power. Credit Suisse holdings (Australia) Limited has also become a substantial holder by holding 22,424,858 of securities with 5.36 per cent of the voting power.

On financial front, the company recorded a net loss after tax of $171.6 Mn in 2017 against the loss of $224 Mn in the prior corresponding period. Free cash flow was $322 Mn with Iluka ending 2017 with net debt of $183 Mn, down from $506 Mn at the beginning of the year. The company has declared a fully franked final dividend of 25 cents per share and this will be paid on April 23, 2018. Despite reporting financial loss for the year, the company’s underlying performance was decent in terms of operational (with significant increase in its yearly production of zircon, rutile and synthetic rutile) and governance perspective. Meanwhile, the share price rose by 22.9% in the last six months as on March 22, 2018 and the stock is trading at a high level. Looking at trading scenario and mineral sands industry outlook, we give a “Hold” recommendation atthe current market price of $10.83
 

Net Debt Performance (Source: Company Reports)

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