Following the commencement of Bell Potter's coverage of IOH a...

Following the commencement of Bell Potter's coverage of IOH a few days ago, today MD Charlie Aitken gave it an endorsement in his daily news letter:

"Iron Ore Holdings (IOH)

IOH trading close to cash backing

IOH is trading $22m above its cash backing of $110m. IOH looks cheap trading at only $22m above its cash backing of $110m ($0.68/sh). In Feb 2012, IOH signed a MoU with FMG, which granted FMG with a 13-month exclusive option on IOH’s Iron Valley tenements. If the option is exercised, FMG will obtain a licence to develop the tenements and IOH will receive a $20m cash payment and a 2-5% revenue royalty on future production. The option is set to expire in March 2013. Based on IOH’s current share price, the market appears to be discounting this deal. We value the Iron Valley tenement alone on a risked NPV of $122m ($0.76/sh). Should the FMG deal be finalised, we believe this could result in a stock re-rating.

IOH looks attractive on a ‘bare bones’ valuation. If we were to include only: IOH’s cash balance as at 30 June; our assessed valuation of Iron Valley; and an allowance for corporate costs, excluding all other tenements, we derived a ‘bare bones’ valuation of $0.97/sh, 14% higher than the current share price.

Inflows of $21m for the quarter and cash on hand of $110m. Over JunQ12, IOH received $21m for the Lamb Creek and Yandicoogina Creek tenements. The payment received represented a final payment in the transaction involving the Phil’s Creek, Lamb Creek and Yandicoogina Creek satellite tenements to Mineral Resources. As at 30 June, IOH had cash on hand of $110m (or $0.68/sh).


Earnings and valuation changes. We have made some changes to our modelling, which has resulted in a reduction to our target price and NPV by 35% to $1.43sh (prev. $2.22/sh)


Investment view - Buy (Speculative) rating, PT - $1.43/sh. IOH has one of the largest resource bases of any of the Pilbara juniors, and is one of the last not yet in play. IOH is looking to add value for shareholders through self-development, joint venture structures or divestment of these assets. However, being reliant on negotiations with established players is inherently risky and we rate this investment as highly speculative.


Recommendation:

Buy (speculative)

Previous Close:

$0.82

Price Target:

$1.43"

Personally, I believe this to be very conservative & wouldn't be surprised that it is a deliberate easy target price & that if we get to that price, he'll re do the numbers to come up with a figure closer to high $2's. The important thing is that any coverage is good coverage. The more 'experts' who come on board lend more gravitas to the story.