KGI Research Singapore

Singapore's leading broker offering Futures, FX, Equities and Wealth Management.

Company Update: Fortress Minerals Ltd. (FMIL SP/ OAJ.SI)

Company Update: 20 November 2023

A brighter side as iron ore prices recover

  • Holding steady. 1H23 poised more headwinds for Fortress Minerals. The company’s profitability has been negatively affected by declining iron ore prices since mid-2022 and the presence of high inflationary pressures. While 2Q24 revenue increased by 11.6% YoY to US$17.3mn, GPM fell slightly to 66.1%. NPAT dropped 40.4% YoY to US$2.5mn, and NPM dropped to 26.4% in 2Q24 from 31.3% during the same period last year.
  • Stabilising iron ore prices. Iron ore prices stabilises around US$110-120/tonne with a recent rally since Sep 2023, as China has been rolling out more supportive policies, and its economy showed positive signs of recovery. The company also expects sales volume to continue to remain strong at current levels for the rest of 2023, with the exception of a one-off sale of 40,000 tonnes of iron ore concentrates to the China market last quarter.

2Q24 results update

The company reported a revenue of US$17.3mn for 2Q24, up 11.6% YoY, mainly attributable to the increase in sales volume. This is due to a one-off sale of 40,000 tonnes of iron ore concentrates to the China market. Despite the impact of a slightly higher average unit cost of sales in 2023 due to inflationary pressures, 2Q24 GPM remained relatively stable at 66.1% compared with an average GPM of around 70% for the past few quarters. EBITDA increased slightly by 2.80% YoY to US$8.31mn for 2Q24.  

Going forward

We think the end of interest rate hikes is already in sight as inflation has been cooling down. The company should see a decline in costs and expenses going into the calendar year of 2024. We expect the company business to remain stable in 2H23. We maintain an OUTPERFORM recommendation with an unchanged target price (TP) of S$0.35.

Valuation & Action

We maintain an OUTPERFORM recommendation with an unchanged TP of S$0.35, based on a blended valuation, using discounted cash flow (DCF), with a terminal growth rate of 2% and a WACC of 10%, as well as a comparable multiples valuation using an industry EV/Resource multiple of 3.6x. Fortress Minerals’ strong balance sheet, low gearing ratio, and ability to generate cash flow to fund its future expansion plans put it at a competitive advantage over its peers. While unit cost is higher YoY due to the high inflationary pressures, we expect it to decrease in the near term as inflation has been cooling down. We are still upbeat on the company’s short-term growth strategies and long-term growth potential.


Iron ore prices are the key driver of the company’s profitability. Iron ore prices shall resume a downtrend if China’s manufacturing and construction activities remain in a downturn amidst ineffective monetary and fiscal policy support. A potential global recession is another headwind for iron ore prices.

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