Two ASX stocks that underperformed – Fortescue Metals Group Ltd and Whitehaven Coal Ltd

Fortescue Metals Group Ltd

FMG Details
· Volatility in iron ore prices: Fortescue Metals Group Ltd (ASX: FMG) stock lost over 3.8% on January 09, 2017 due to correction in iron ore prices. Recently, Metalicity Limited reported that they are acquiring highly prospective lithium exploration portfolio (“Portfolio”) in the Pilbara region of Western Australia from the group. FMG recently reported that S&P global ratings has upgraded FMG issuer credit rating to BB+ from BBB. The rating agency believed that FMG credit position improved after their further debt repayments despite iron ore prices volatility.

· Recommendation: The shares of FMG delivered outstanding returns to shareholders in 2016 year. FMG stock generated over 241.1% in the last one year (as of January 06, 2017). Iron ore prices are also now expected to witness volatility. We give an “Expensive” recommendation on the stock at the current price of – $ 5.84

Whitehaven Coal Ltd

WHC details
·         Weak Narrabri mine projections hurting the stock sentiment: Whitehaven Coal Ltd (ASX: WHC) stock fell over 1.81% on January 09, 2017 as the group lowered their guidance for Narrabri longwall operation. For Narrabri, WHC now forecasts full year ROM coal guidance in the range of 7.5Mt to 7.8Mt which is affected by a discrete area of adverse geotechnical conditions at the mine. But, the group assured their FY2017 saleable production guidance to be on track as expected. Metallurgical coal sales in the December quarter were 22% of total sales against 16% in the September quarter. Sales of metallurgical coal in the second half of the year are expected to grow to 26% of total group sales on track with the target of getting 35% of total group sales when Maules Creek reaches full capacity.
·         Recommendation: WHC stock already rose over 313.4% (as of January 06, 2017) in the last one year placing the stock at unreasonable level. We give an “Expensive” recommendation on the stock at the current price of - $ 2.72

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