Gourav on Ausbiz on Deterra, as well as MIN and FMG. Agree with his views on DRR, think the quality of this company is completely misunderstood by the market. Outstanding royalty model and a great business 

Disc: Hold both DRR and MIN in RL

https://www.ausbiz.com.au/media/fortescue-metals-its-a-value-trap?videoId=14969&sectionId=1908

My thinking...

A lower iron ore price could potentially reduce BHP revenues from the MAC royalty… so... in order for BHP to try and maintain total revenue I expect renewed focus on increasing volumes. The results presentation, in August, says to expect growth to 2.4x volume - ‘in the future’ (this was before the latest drop in iron ore price). With higher volumes PLUS capacity payments I expect the iron or price to have less impact on DRR. I would expect production to be increased at a faster pace - where possible.

Given a probable lack of royalty based acquisition opportunities (until later - when all turns to mush), DRR intends to pay the royalty (less their party time fees) to shareholders as an increasing dividend. The dividend is already large - comparatively.

Change of director's interest:

Jennifer Seabrook purchased $100k ish of DRR shares Mid-September. She doubled her direct holding (direct holding is now about ½ of her total holding).

Hold IRL
 

Goldman BUY rating, target price $5.20, due to:

• Goldman forcasts EBITDA to more than double for FY22
• Forecast 9% dividend/FCF yield for FY22.
• DRR has lower leverage than the Fe miners in the event Fe prices roll further, given the high margin nature of DRR’s royalty business.

I think Goldman's forecasts are way too rosy. Many would agree we are nearing the end of the iron ore supercycle.

FY 21 Results

Key Highlights:

• Revenue of $145.2 million with an NPAT of $94.3 million
• Underlying EBITDA of $135.5 million at a Post-demerger margin of 96%
• Declared a Final Dividend of 11.52 cents per share (fully franked) distributing 100% of NPAT

DRR incorporated on 15 June 2020 and demerged from 
Iluka Resources on 2 November 2020. It collects royalties - mainly from iron ore mining at BHP's Mining Area C (MAC). Essentially a company that collects a cheque without lifting a finger.

There isn't much of a "growth" story here, and is largely dependent on external parties where Deterra doesn't have control over such as the growth of the MAC South Flank mining capacity.  We are yet to see what "identification and evaluation of new royalty opportunities" exactly are. With a net cash position of $40 million hopefully something interesting comes out soon.

Disclosure: held.

Royalty receipts for June 2021 quarter $54.9m. Not bad for doing nothing. That is 1.232% of FOB revenue $52.8m + $2m capacity payout +100k from 2 other small royalties. That's up over 50% from the previous quarter - all for doing next to nothing ;-).

Let’s hope they spend our money wisely. Their intention is to increase dividends to shareholders. This is good as I am more than willing to spend money on good wine.

16-Nov-2020:  Investor Presentation at UBS Australasia Virtual Conference 2020.

[I hold DDR shares.]  [Edit:  No - sorry - I do NOT hold DDR shares... I hold DRR shares.  DDR=Dicker Data.  I hold Deterra Royalties shares.]