VALE
Vale Shs Sponsored American Deposit Receipt Repr 1 Sh
Industrial/Transportation
08/10/2017
Presented
| Date | 08/04/2017 |
| Price | $9.97 |
| Market Cap | $51.38B |
| Ent Value | $66.23B |
| P/E Ratio | 14.34x |
| Book Value | $7.84 |
| Div Yield | 4.33% |
| Shares O/S | 5,153.38M |
| Ave Daily Vol | 27,445,806 |
| Short Int | N/A |
Current
| Price | $10.79 |
| Market Cap | $46.08B |
| Vale SA engages in the production and exportation of iron ore, pellets, manganese, and iron alloys, which are raw materials needed for steelmaking. It operates through the following segments: Ferrous Minerals, Coal, Base Metals, Fertilizers and Others. The Ferrous Minerals segment includes the extraction of iron ore and the production of pellets, manganese ore, iron alloys, and coal, and logistics services. The Coal segment comprises the extraction of coal and its logistic services. The Base Metals segment involves the production of non-ferrous minerals, which include nickel, copper, and aluminum. The Fertilizers segment is comprised of three major groups of nutrients: potassium, phosphate, and nitrogen. The Others segment encompasses joint ventures and affiliates of other businesses. The company was founded on June 1, 1942 and is headquartered in Rio de Janeiro, Brazil. |
Publicly traded companies mentioned herein: BHP Billiton Ltd (BHP), Fortescue Metals Group Ltd (FMG AU), Mitsui & Co Ltd (8031 JP), MMC Norilsk Nickel PJSC (MNOD LI), Rio Tinto PLC (RIO), Vale SA (VALE)
Highlights
The presenter views Vale (VALE; $9.97) as a directional bet and a way to invest in China’s push for a cleaner environment. He is long the stock and believes the pressure the government is broadly applying on industrial companies to reduce emissions has created “a structural bifurcation” in the iron ore market that favors higher-quality iron ore producers such as Vale. The ferrous content premium is known (i.e., how much someone will pay per 1% grade above or below the 62% ore grade benchmark) and has remained “fairly constant” over time. However, the presenter’s theory is that the delta in price used to be ~90% explained by the ferrous content and was tied to the profitability of China’s steel mills, and today, “There is something else - an ‘other’ component - in the ore that people are paying-up for”. This dynamic should lead to better realizations for Vale, which can adjust its mix in favor of >62% ore grade iron ore. For each incremental $1/ ton Vale realizes on its iron ore the stock should move ~10%, and the presenter sees the potential for a 2-3% shift (at $50/ ton iron ore, holding all else constant, he sees this resulting in this +$1.50-2/ ton of iron ore, or +15-20% for the stock).
◆Signing up and creating account with us unlocks this content for you. Contact us today for full access to DeMatteo Research and more.
◆Signing up and creating account with us unlocks this content for you. Contact us today for full access to DeMatteo Research and more.