Mineral Resources Ltd

              MIN Dividend Details
 
Resource Expansion Programs and Cost Reduction Strategies though undefined: Mineral Resources (ASX: MIN) came out with the news on commencement of resource expansion program at the Mt Marion Lithium Project (with Neometals and Jiangxi Ganfeng Lithium Co.) wherein 335 reverse circulation holes and 30 diamond holes are to be drilled. This program is expected to be over by March quarter 2016. As per the quarterly exploration and mining activities report for the first quarter of FY 2016, MIN disclosed that mine production from the two operating mines was just over 3 million tons for the quarter with production from Iron Valley increasing by 9% compared to the previous quarter. Total export volumes at 2.6 million tons were marginally higher than the previous quarter and operations in Iron Valley and Carina continue to be profitable for the quarter. Total Utah Point production was 1.76 million tons of which 1.47 million tons was shipped and total iron ore production was 3.08 million tons of which shipments were 2.63 million tons.
 

Super Quad Delivery (Source: Company Reports)
 
The Iron Valley mine achieved budgeted production for the quarter though haulage and shipping were slightly lower. Further, cost reduction and productivity improvements were achieved during the quarter mainly through modifications of mining fleet payloads to improve cycle times and utilisation, optimisation of drill and blast design and reduced flight costs. Exports of previously stocked fines products continued as part of the previously contracted delivery forward sold until January 2016. A further parcel of 500,000 tons was forward sold at a fixed price through February 2016.
 
 

Mineral Resource Estimate and Exploration Target Outlines over Tenure (Source: Company Reports)
 
For Carina Mine, mining, crushing and haulage operations achieved the budgeted performance though shipping was below expectations because of throughput restrictions at the ship loader. Reductions in cost and improvements in efficiency were achieved through with regards to pit waste dumping, modifications to airstrip operations, crusher optimisation and increased total train tonnage. For Yilgarn mine, the construction of the haul road connecting J4 to the central processing plant and the development of the mine at J4 are both progressing as planned. The company continues to pursue its application for environmental approvals for J5 and Bungalbin East and the scope of the Public Environmental Review has been agreed with detailed environmental studies in progress.
 
As part of the cost reduction strategy, the company reports to progress well the implementation of Super Quad road trains on the haulage route from the Iron Valley to Port Hedland. These road trains are 60 m long and carry an additional 28 t of ore compared to conventional trains reducing the number of truck movements and reducing cost. The first haulage was achieved in late September and additional Super Quad road trains will be progressively introduced over the balance of the calendar year. The development of the Bulk Ore Transportation System is progressing as planned and the modifications to the elevated track and rolling stock design reduces operational and technology risk. The design also reduces track cost and improves rolling stock efficiency by increasing the wagon load capacity from 20 t to 60 t per wagon. In conjunction with the project, the company is also pursuing a multi-user transhipping facility in the inner harbour at Port Hedland to overcome the limitations of the Utah Point facility owned by the State government. Basically, cost reduction initiatives have been undertaken both at the Iron Valley and Carina mines but the same have not been quantified properly.
 
Given the modest growth performance for FY 2015 (revenue of $1.3 billion and underlying net profit of $109 million) with other uncertainties revolving around cost reduction along with stock currently trading at a high P/E ratio of 61.31x, we believe that the stock is currently overpriced and expensive.
 
 

 

AMP Ltd

         AMP Dividend Details
 
Result driven momentum and efforts in capital raising: AMP Limited (ASX: AMP) has undertaken various efforts with regards to capital raising including the recent launch of a $200 million capital raising in a bid to meet new regulatory guidelines on capital reserves and reinforce the capital base. Under the capital notes replacement offer, AMP may redeem or resell for cash or convert the notes depending on various situations.
 
The company exhibited first half of FY 2015 results with a net profit of $ 507 million ($ 382 million of prior corresponding period) and underlying profit of $ 570 million ($ 510 million of prior corresponding period). The 12% rise in underlying profit was due to solid growth in all businesses. There was good momentum in wealth management and AMP Capital external net cash flows. Wealth protection recovery continues to be on track and the actions taken by management will continue to ensure that the improvements are sustainable and scalable. Disciplined cost management of controllable costs resulted in a reduction in the cost to income ratio which declined by 1.9% to 43.1% compared to the previous year. The capital position continues to be strong with a surplus of $ 2.3 billion and the underlying return on equity rose by 1% to 13.5% in comparison to the previous period. The interim dividend was 14 cents per share franked to 85% and the DRP was neutralised with shares bought on the market.
 
 
The strategy of the company continues to be the delivery of long-term growth. This involves the continued momentum in the transformation of core Australian businesses focused on initiatives centred around customers and the business efficiency program is on track and delivering benefits at the expected run rate. Commercial relationships continue to be strengthened with national champion partners in Asia.
 

1H15 Movement in underlying profit (Source: Company Reports)
 
The wealth management business reported underlying earnings growth driven by strong increases in Assets under Management and good cost control. Operating earnings were $ 207 million ($ 183 million of prior corresponding period). Total net cash flow was $ 1.15 billion ($ 1.11 billion of prior corresponding period) and costs to income ratio was 44.8% (48.2% of prior corresponding period). AMP Capital reported operating earnings growth of 26% due to good external net cash flows and AUM growth. Net performance fees grew to $ 39 million ($ 22 million of prior corresponding period) driven by the strong performance in infrastructure funds. The cost to income ratio was below the range of 60% to 65% and average AUM was up 11% to $ 158.5 billion.
 

Business Efficiency Program (Source: Company Reports)
 
The Wealth protection business saw a 9% growth in profit margins because of repricing for a client and disciplined cost management. The lump sum experience during the half year reflects the impact from term life claims but the volatility is likely to remain despite corrective action by management. The negative experience prevailed in 3Q15 for the retail income protection.
 
The balance sheet continues to be healthy with conservative ratios and regulatory capital surplus above the minimum requirements. Total capital resources shareholder’s equity were $ 10 billion ($ 9.8 billion) with shareholder's equity of $ 8.47 billion ($ 8.34 billion). Corporate gearing was 10% and the underlying interest cover improved from 14.6x to 18.5x. Based on regulatory final planned capital standards, the group expects to meet the standards from the available capital resources.
 
We note that the group expects to grow earnings and increase dividends for FY 2015 with further growth in earnings and dividends in FY 2016. However, considering all the above prospects, we think that the share is expensive at the current price.
 
 
AMP Daily Chart (Source: Thomson Reuters) 

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