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UNDERVALUED: Two recent deals suggest Kerry Stokes' Iron Ore Holdings stock is trading at a hefty discount.

How to make $500 million without really trying

Kerry Stokes probably doesn’t need an extra $500 million, but if anybody else wants to triple their money it might be time to join him on the share register of Iron Ore Holdings (IOH).

Stokes, a billionaire best known as the major shareholder in the Channel Seven television network and Westrac industrial equipment business, is also the 50.5% shareholder in IOH, one of many small iron ore explorers active in the Pilbara region of Western Australia.

For some time, management at IOH has been saying that investors are substantially undervaluing the stock, a claim which has fallen on deaf ears because that’s what managers at small exploration companies always say.

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Comments

These calcs are incorrect, you have the numerator / denominator numbers the wrong way around. Ie the calc for the Hamersley deal is ~$0.52 ($32m / (106Mt @ 58.6%). The calc for the MIN deal is ~$1.35 ($42m / (54.8Mt @ 56.7%). Unfortunately this infers that Iron Valley is only worth ~$78.5m ($0.52 x 259.1Mt @ 58.3%). Based on the company’s numbers, IOH have ~463.2 Mt of contained Fe (including low grade ore) – at best the company is worth ~$240m using your RIO comp (lower grade ore not likely to fetch ~$0.50 / tonne).

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Share Price

Closing price for the last 90 trading days
Source: Morningstar

BN30 Index

Index = 100 as of 4 Jan 2016
Source: Morningstar

Total Shareholder Return as at 31/08/16

1 year TSR5 year TSR
112thFortescue Metals Group162%-2%
316thSouth3226%0%
534thWoodside Petroleum-8%1%
543rdIluka Resources-9%-14%
718thAtlas Iron-58%-68%
777 WA (and selected non WA) listed companies ranked by 1 year TSR relative to other companies with similar revenue
Source: Morningstar

Share Transactions

23/09/16
$0 Other
23/09/16
$0 Other
20/09/16
$0 Issued
Total value as at the date of the transaction
Source: Morningstar

Revenue

1st-Fortescue Metals Group$9,806.1m
2nd↑South32$8,262.9m
3rd-Woodside Petroleum$6,935.4m
4th↑Iluka Resources$884.1m
5th↑Atlas Iron$803.7m
523 listed resources companies ranked by revenue.
Source: Morningstar

Remuneration from Fortescue Metals Group

3rdNev Power$5.992m
12thStephen Pearce$2.551m
25thNick Cernotta$1.566m
Ranked by total remuneration from all listed WA companies

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