FYs 19 and 20

OK folk, the party's over, let's start preparing for the next one.

For FY19, my simple kick-off reasoning is that we use $1.1B for revenue, and the same NPAT/Revenue percentage as applied to FY18 – namely 5.59% ($42.2M/$754.3M). I have used the share tally of 321.8 (in the on-line brokers' information supplied by Morningstar). I am not too fussed how accurate that share tally is, because I am only after a crude guesstimate of EPS. I have left the NPAT percentage I used at $42.2M/$754.3M (5.59% seems to imply a nuance of accuracy, whereas 42.2M/$754.3M only implies, "same as before".

. . . . . . . . Revenue . . . . NPAT . . EPS
FY18 ..... $754.3M .. $42.20M .. 13.1c
FY19 .. $1,000.0M .. $61.54M .. 19.1c

Investors would now tend to look at FY19 to get the “E” of “PER”, and for the want of a factor, use 10. That suggests an SP of $1.91, which is about where the SP now is. From now onward, news will come in that would tend to change the mood of the market, so even though the $1.1B is not likely to change, because new contracts would tend to have minor impact on FY19, investors will express their sentiment by a higher PER initially applied to FY19's forecast, but switching to a PER of circa 10 to be applied to FY20's forecast. A good-news Announcement would see a the SP hit $2, and then I'll start seriously thinking of a new target.

It would only take a PER of 11 applied to FY18 to get 19.1c x 11 = $2.10. Perhaps we will witness that this calendar year. For now, I'll leave the matter of guesstimating FY20's Revenue and NPAT to Pbawley. I imagine revenue would be circa $1.4B, so NPAT would be something like $1,400M x 5.5% = $77M, or an EPS of 24c. This suggest that in Calendar year 2019, we will see $2.40.

All pure speculation on my part, of course, and the underlying numbers will not pan out as I wrote above, even if the target SPs turn out to be reasonably close to the mark. Revenue could be greater, but NPAT margin less, or vice versa. Alternatively, some idiot politician may decide to do the usual homage to the USA by kissing the President's backside, and join a coalition of the willing to hassle China, who in a fit of pique switches its iron ore imports to Brazil and West Africa, or the $5 a tonne royalty on iron ore gets up again as a popular electioneering gambit.