Market Wrap - Stock Pick — Kumba Iron Ore
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Andile Buthelezi from Sentio Capital chose Kumba Iron Ore as his stock pick of the day.
"I'm going with Kumba, I think they got a bit of a beating yesterday after they released a production update. They guided in that production update that they will probably sell a million tons less then they had planned to for the full year, but a million tons in the context of how many tons they produce in a year, they produce between 43 and 44 odd million tons so it's not immaterial but it is worth considering. If you look at the bigger picture this company is generating a lot of cash and they're not trying to pay that cash out, if you look at the dividend yield it is probably sitting in at around 10%. Yes iron ore prices have come down quite a bit relative to earlier in the year, and yes, you have to keep an eye on just how well China is doing. Look it is risky but I think if you look at the cash flows that they're generating and their willingness to pay it out to investors I think it's looking attractive at these levels."
"I'm going with Kumba, I think they got a bit of a beating yesterday after they released a production update. They guided in that production update that they will probably sell a million tons less then they had planned to for the full year, but a million tons in the context of how many tons they produce in a year, they produce between 43 and 44 odd million tons so it's not immaterial but it is worth considering. If you look at the bigger picture this company is generating a lot of cash and they're not trying to pay that cash out, if you look at the dividend yield it is probably sitting in at around 10%. Yes iron ore prices have come down quite a bit relative to earlier in the year, and yes, you have to keep an eye on just how well China is doing. Look it is risky but I think if you look at the cash flows that they're generating and their willingness to pay it out to investors I think it's looking attractive at these levels."
