Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), and CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

5 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"The level of detail in Pete's work is superlative across all of Australia's housing markets" - Grant Williams, co-founder RealVision - where world class experts share their thoughts on economics & finance - & author of Things That Make You Go of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, MacroBusiness.

Wednesday, 24 August 2016

China urbanisation

Chinese cities growing

An extraordinary turnaround story and set of numbers was reported by iron ore producer Fortescue Metals Group (FMG) this week, with reported statutory profit surging back in FY2016, and a profit after tax of US$985 million being reported. 

This has been achieved in part through cost reduction, with iron ore prices remaining much lower than the levels seen in FY2014.

One slide of interest from the corporate presentation highlighted how 300 million Chinese are still expected to urbanise at a rate of around 16 million per annum, underpinning demand for Australia's iron ore and coal over the medium term. 

Source: ASX (FMG)

Perhaps not surprisingly, FMG believes that iron ore demand and supply are fairly evenly matched.

Other analysis, including from Westpac, suggests that the iron ore market is oversupplied and that iron ore prices will surely fall later in 2016.

Coking coal on the other hand is in the midst of a spectacular rally, with prices up by more than 60 per cent since mid-February.

Perhaps the Reserve Bank's Index of Commodity Prices will be staging a further rebound in due course, having already jumped in July.

FMG has reduced its operating costs impressively, with its C1 operating costs slashed across 10 consecutive quarters to just US$14.31 per wet metric tonne in the June 2016 quarter, competing fiercely with BHP Billiton and Rio Tinto for the mantle of lowest cost producer in Australia.

The results were a beat across almost every metric, resulting in a substantial US$2.7 billion in free cashflows. 

This has allowed the group to reduce its net debt significantly in FY2016 to below US$5.2 billion, including cash of US$1.6 billion.

Being a high leverage/high beta stock, the share price performance this year has been extraordinary, exploding from below $1.50 in January to touch above $5 earlier this week. 

A great result for Fortescue, and those shareholders who stayed the course will very much enjoy the 12 cents per share final dividend.

The Reserve Bank's Commodity Price Index for August is due to be released next week.