Fortress Minerals Ltd IPO

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Fortress Minerals Ltd is offering 75 mil placement shares (including 51,250,000 Cornerstone Shares) for its IPO on Catalist at $0.20 per share.  There is no public offering. Market capitalization based on the Placement Price and Company’s post-Placement share capital of 500,000,000 Shares is 100mil.

The IPO will raise around S$12.50 mil after deducting lisiting expenses of S$2.5 mil. The use of proceeds is as below.

Placement Proceeds

Business Overview

The group is principally in the business of exploration, mining, production and sale of iron ore concentrate to steel mills and trading companies in the PRC and Malaysia.

Business Overview

Financial Highlight

FY16 to FY18 has been loss-making due to starting up cost and finally, in 1H2019 they are making a profit of $6.5mil and net profit of $2mil. It’s nice of the group to notice that there will be an increasing distribution of dividends from 10% to 20% by 2021.

Financial Highlight

What I like

Rebar price is recovering in the market from all times low.

Mining of high grade ore in turn lower mining cost but higher selling cost.

The company is finally making profit after all the setting up and there’s a plan to pay dividends.

What I don’t like

Blasting is environmental unfriendly.

Main export is to PRC and many steel mills are force to shut down due to environmental issue.

Steel mill are changing from blasting to EAF by using recycle steel scraps.

Conclusion

I personally had some contacts with lime mining company located in Malaysia and got to know that the profit margin is very low for such mining company. As such there is no need to pay a premuin of 323% to NAV.

I believe can get lower price in open market however there will be lack of liquidity as the key shareholders will hold 80% of the shares. 

Author: The Financial Guy

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