Thursday, May 23rd, 2024

This Singapore stock has delivered annual total returns of 9.2% since 2019

Fortress Minerals has been a standout performer for investors, particularly those who bought in at its IPO and stayed the course.

Since March 2019, the stock has delivered annual total returns of 9.2%, significantly outperforming bank deposit rates over the same period.

For instance, investing in Fortress Minerals at its IPO price and collecting dividends would have resulted in a total return of 55% over five years, compared to the FTSE Asean All-Share benchmark’s gain of 5%. This is remarkable given the company’s relatively low profile.

Operating in Malaysia’s high-grade iron ore market, Fortress Minerals produces magnetite and iron ore concentrates primarily for Malaysian steel mills, with some exports to Chinese trading firms.

The company plans to expand its production at the Cermat Aman mine and explore additional mining opportunities in East Malaysia to diversify its revenue streams. It is also considering mining other minerals like manganese, copper, and gold.

Mineral Resource Estimates indicate that Fortress Minerals’ Malaysian mines still have significant ore reserves, suggesting a long operational lifespan.

In the fiscal year ending February 2023, Fortress reported record sales volumes of 546,076 dry metric tonnes (DMT), a 53% increase from the previous year. Sales volumes for the nine months ending November 2023 reached 429,017 DMT.

Full-year results for the fiscal year ending February 2024 are expected to be strong, supported by rising iron ore prices.

Although there was a slight decline in net profit for the nine months ending November 2023 due to softer prices and inflationary production costs, the recent uptick in iron ore prices is expected to boost full-year results.

Fortress Minerals’ CEO, Ivan Chee, who owns nearly 49% of the company, is committed to rewarding shareholders with a payout ratio of 25% to 30%. The company’s outlook remains positive, driven by strong regional demand for iron ore and new agreements with local steel mills. Its high-grade ore, known for its quality and low impurities, is expected to command a premium, aligning with global efforts to reduce carbon emissions in the industry.

Despite trading at around 40 cents a year ago and peaking above 70 cents in mid-2021, Fortress Minerals’ stock has demonstrated resilience. Its strong balance sheet, low gearing ratio, and ability to generate cash flow position it favourably for future expansion plans compared to its peers.

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