Investment Thesis
- One of the largest miners in the world with a competitive cost structure.
- Tier 1 assets globally, which are difficult to replicate.
- Highly cash generative assets with attractive free cash flow profile.
- Shareholder return focused – ongoing capital management initiatives.
- Commodities price surprises on the upside (potential China stimulus to combat Coronavirus impact).
- Strong balance sheet position.
- Electrification and light-weighting trends in automobile industry provide long-term growth runway for aluminium demand.
Key Risks
We see the following key risks to our investment thesis:
- Further deterioration in global macro-economic conditions.
- Deterioration in global iron ore/aluminium supply & demand equation.
- Production delay or unscheduled site shutdown.
- Natural disasters such as Tropical Cyclone Veronica.
- Unfavourable movements in AUD/USD.
- Company not achieving its productivity gain targets.
1H21 results summary
Relative to the pcp (1H20), and in US$:
- Net cash generated from operating activities of $13.7bn was +143% higher on higher pricing for iron ore, aluminium, and copper.
- $10.2bn free cash flow reflected stronger operating cash flows partially offset by a +24% rise in Capex of $3.3bn (driven by higher replacement and development capital as the Company ramp up its projects).
- $21.0bn underlying EBITDA was 118% higher (on 61% margin).
- $12.2bn underlying earnings (reflecting underlying EPS of 751.9cps) was +156% (with underlying effective tax rate of 29%).
- The Board declared cash return of 561cps, broken into interim dividend of 376cps and special dividend of 185cps. Payout is 75% of underlying earnings. (6) Balance sheet was stronger with net cash of $3.1bn versus net debt of $0.7bn in the pcp.
Company Description
Rio Tinto Limited (RIO) is an international mining company with operations in Australia, Africa, the Americas, Europe and Asia. RIO has interests in mining for aluminium, borax, coal, copper, gold, iron ore, lead, silver, tin, uranium, zinc, titanium dioxide feedstock and diamonds.
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
Mitre Mining Corporation Limited opened the offer for its IPO on 21 August 2021 and closed the offer on 10 September 2021. The shares get listed on ASX on 30 September 2021.
The Offer is for an initial public offering of 25,000,000 Shares at an issue price of $0.20 each to raise $5 million. The Offer is open to investors with a registered address in Australia. The Company does not expect to pay dividends in the near future as its focus will primarily be on growing the business.
PURPOSES OF OFFER
The purposes of the Offer are to:
- Raise $5,000,000 pursuant to the Offer (before associated cost)
- Assist the Company to meet the requirements of ASX and satisfy Chapters 1 and 2 of the Listing Rules, as part of the Company’s application for admission to the Official List.
- Position the Company to seek to achieve the objectives.
- Provide the Company with access to equity capital markets for future funding needs; and
- Enhance the public and financial profile of the Company.
PROPOSED USE OF FUNDS
Following the Offer, it is anticipated that the following funds will be available to the Company.
| SOURCE OF FUNDS | ($) |
| Existing cash reserves | 187,518 |
| Proceeds from Offer | 5,000,000 |
| TOTAL FUNDS AVAILABLE | 5,187,518 |
The following table shows the intended use of funds in the two-year period following admission of the Company to the Official List:
| USE OF FUNDS – YEAR 1 | $ | % |
| Exploration expenditure | 1,900,000 | 64.19 |
| General administration and working capital | 513,547 | 17.35 |
| Estimated expenses of the Offer | 546,215 | 18.46 |
| Total – Year 1 | 2,959,762 | 100.00 |
| USE OF FUNDS – YEAR 2 | $ | % |
| Exploration expenditure | 1,512,146 | 67.88 |
| General administration and working capital | 715,610 | 32.12 |
| Total – Year 2 | 2,227,756 | 100.00 |
| TOTAL FUNDS ALLOCATED | 5,187,518 | 100.00 |
Financial Information
| Particulars | Period ended 30 june 2021 (in$) |
| Loss after income tax | (98,535) |
| Cash at end of financial period | 254,321 |
| Total current assets | 272,110 |
| Total liabilities | 18,575 |
Mitre Mining Corporation Limited IPO Subscription Status (Bidding Detail)
Mitre Mining Corporation Limited IPO was oversubscribed and closed the trading at AUD$0.255 on 30 September and took a steep fall on 4th October at AUD$ 0.23.
About the company
Mitre Mining Corporation Limited is a public company incorporated in Australia.The Company is an early stage mineral exploration and development company focused on gold and base metals discoveries within the Project.
Since its incorporation on 2 November 2020, the Company has secured the Tenement (EL9146) and has undertaken initial geological and geophysical desktop studies, interpretations and reconnaissance field work.
Following completion of the Offer, the Company intends to undertake exploration activities on the Project.
(Source: https://mitremining.com.au/prospectus/)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
However, growth has been lacking as more customers shift their workloads to the cloud, bypassing Oracle’s solutions. Despite Oracle’s cloud migration efforts, cloud competition will likely provide headwinds for Oracle.
However, we don’t view the company as being on the forefront of recent software trends, and new and potential customers appear to be looking past Oracle for their database needs. Database preferences are far wider today due to the sheer number of ways to manipulate data, and the different data storage practices this necessitates. In turn, Oracle is losing database market share to new database types that may be better suited to the cloud.
Additionally, the transition to the cloud is prompting enterprises to change software vendors away from all-in-one ERP systems to application specific that are best of breed. In response, Oracle is banking on its second-generation cloud to not only cater to its traditional enterprise workloads, like supporting databases, but also general use workloads. However, we view Oracle’s cloud as sub-scale to Amazon and others and we doubt Oracle can close this gap soon. In our opinion, Oracle should still be successful in moving a significant amount of its traditional on-premises workloads to Oracle cloud. However, migrating all of its customers is not such a sure thing, as cloud-first software vendors have been able to take meaningful share from legacy Oracle customers.
Financial Strength
Oracle is in healthy financial standing. As of fiscal 2020, Oracle had $43 billion in cash and equivalents versus $72 billion in debt. However, Oracle should generate robust free cash flow in the years ahead to settle these debt obligations over time. We think that Oracle will have the capital to increase its total annual dividends to $1.28 in fiscal 2025 from $0.96 in fiscal 2020, as the company continues to make share repurchases and acquisitions. However, we think that the magnitude of acquisitions will moderate as the company comes off of its buildout of its second-generation cloud product and has stressed their recent preference to build new capabilities in house. In terms of capital expenditures, we think Oracle will spend an average of $1.6 million per year over the next five years, as the company continues to require build outs for its cloud operations.
Bulls Say
- Oracle’s relational database should be able to post strong growth as customers continue to depend on its quality features, such as data partitioning which brings incomparable load balancing efficiency.
- Oracle’s autonomous database and IaaS was built with ease of use in mind, which could bring a significant base of first-time Oracle users to the company, strengthening top line results.
- Oracle’s stake in TikTok Global and cloud services to TikTok’s U.S. operations should add a significant boost to Oracle’s top line and attract more “general use” cloud customers.
Company Profile
Oracle provides database technology and enterprise resource planning, or ERP, software to enterprises around the world. Founded in 1977, Oracle pioneered the first commercial SQL-based relational database management system. Today, Oracle has 430,000 customers in 175 countries, supported by its base of 136,000 employees.
(Source: Morningstar)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
