AWC is for the risky investor.
The company was trading at $6.80 before the GFC and fell to $0.65 as the price of aluminium fell to the low of $0.78 USD.
Aluminium is currently trading at $0.82 USD however the cost of bauxite has risen 35% in the past year due to supply, which is likely to induce higher Aluminium prices.
Alcoa's third-quarter 2013 alumina margins were maintained despite lower prices.
Productivity improvements and favourable exchange rates helped the cause. So too did higher-than-expected alumina production of 4.0 million tonnes versus our 3.9 million tonne target.
The USD 67million alumina segment result, a proxy for Alumina Ltd, or AWC's, profit, improved marginally on the second quarter's USD 64 million profit, and was meaningfully better than the previous corresponding period's loss.
Compared with second-quarter 2013, the Australian dollar fell 8% to USD 0.92. That compares with an approximate 2% decline in realised alumina price. Around half AWC's alumina is Australian sourced.
The company has forecast dividends of $0.08 for 2014 fully franked and a fair value price target of $2.60.
At the current price of $1.00 per share the company is looking like good value but beware that this is more for the trader.
The share price is volatile and will move based on demand, exchange rate and availability of Aluminium, which is not a rare commodity.
The company has a low debt and forecasts positive cash flow over the next 3 years.
This is a play on the aluminium prices and demand going forward couple with the expected increase of demand from China and the roll off of legacy unfavourable contracts could see the company’s performance improve.
For more information on Alumina Limited (AWC) please contact us on 07 4771 4577.