PhillipCapital analyst Vivian Ye has downgraded Fortress Minerals to “accumulate” with a lower target price of 51 cents.
See: Phillip raises Fortress Minerals TP to 81 cents amid strong iron ore prices
The downgrade comes as the company’s results for the 2QFY2022 ended August stood below her expectations.
Revenue and PATMI for the 1HFY2022 stood at 39% and 34% of her FY2021 forecasts, respectively.
Revenue for the 2QFY2022 fell 23% y-o-y due to a 49% collapse in production. Fortress Minerals, however, saw a 48% y-o-y growth in selling prices, which offset some of the weakness in revenue.
The company also saw lower sales volume on the back of production disruptions at Bukit Besi Mine, which stood below expectations.
Fortress Minerals’ average selling price (ASP) of US$141.82 ($191.11)/DMT stood in line with Ye’s forecast of US$140/DMT.
To this end, Ye has lowered her PATMI estimates for the FY2022 by 22% to US$23.9 million. She has also lowered her sales volume forecast by 8.6% to 455,020 DMT.
In addition, she has decreased her ASP forecast to US$120/DMT for the FY2022 as iron ore prices are expected to remain week at around US$140/DMT, with continued steel production cuts in China.
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Fortress Minerals also reported increased bank borrowings of US$22.9 million for the 2QFY2022 due to the acquisition of Fortress Mengapur.
The higher net debt presents another negative on the counter, according to Ye.
As at 10.31am, shares in Fortress Minerals are trading 1.5 cents lower or 3.45% down at 42 cents.
