Macquarie was impressed by the cash returns to shareholders in FY21 which totalled $11bn. Nevertheless, declining iron ore prices are expected to mean returns fall over time.
The company is still expected to maintain 10% free cash flow yields into the medium term as declining capital expenditure will offset the lower iron ore prices. If prices are maintained at current levels this lifts forecast free cash flow yields to 18% for FY23 and beyond.
Outperform maintained. Target is reduced to $25 from $27.
Sector: Materials.
Target price is $25.00.Current Price is $18.13. Difference: $6.87 – (brackets indicate current price is over target). If FMG meets the Macquarie target it will return approximately 27% (excluding dividends, fees and charges – negative figures indicate an expected loss).
