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: 13 May 2024

Iron ore prices recovering

Stable topline. Comparing YoY, Fortress Mineral saw a slight increase in revenue by 0.7% in FY24. Sales volume also saw a slight increase of 0.8% in FY24. Going forward, sales volume is expected to increase as Fortress Minerals ramp up its production capabilities at Bukit Besi, alongside a reduction in average unit cost following the company’s expansion at its Bukit Besi mine.
Rallying iron ore prices. Iron ore prices have been on a rally since Apr 2023, rising from around US$100/ton to its current level at US$115/ton. Iron ore is still seeing a robust global demand recently, especially from China, with Chinese steel exports surging by over 25% from the previous year in March to nearly 10 million tonnes, the highest since 2016. This was magnified by growth in foreign new orders for manufactured goods according to April’s official and private PMIs. However, China’s property sector also remains uncertain, which may impact the demand for iron ore.
Expected increase in production capabilities. The company is currently constructing 2 new ball mills, with the commission of the ball mills expected in 2QFY25. These 2 new ball mills are expected to increase the company’s production capability at its Bukit Besi mine to between 50,000 – 60,000 tonnes per month, which is approximately a 20% increase from FY2024. This can translate to higher sales volume of iron ore for FY25.
• Going forward, while inflation remains stickier than expected, we continue to anticipate an improving cost structure as inflationary pressures ease, alongside lesser costs involved in the expansion of Bukit Besi mine’s deposits. The company should see a decline in costs and expenses in FY25. We continue to expect the company business to remain stable in FY25 and see sales volume improving with higher production capabilities coming from the two additional ball mills. We maintain an OUTPERFORM recommendation and increase our target price (TP) to S$0.40.

FY24 results update.

The company reported a revenue of US$53.9mn in FY24, up 0.7% YoY, compared to US$53.5mn in FY23. Sales volume saw a 0.8% increase to 551 thousand DMT in FY24, compared to 546 thousand DWT in FY23. Gross profit margin declined to 61.7% as the company saw an increase in cost in 4Q24 from the expansion of its Bukit Besi mines. Net profit margin fell slightly to 18.6% in FY24, compared to 22.6% in FY23.

Valuation & Action

We maintain an OUTPERFORM recommendation and increase our TP to S$0.40, based on a blended valuation, using discounted cash flow (DCF) with a terminal growth rate of 2% and a WACC of 8.8%, as well as a comparable multiples valuation, using an industry EV/Resource multiple of 3.6x.


Iron ore prices are the key driver of the company’s profitability. Despite a recent rally in Iron ore prices, 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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