Figure 62: ArcelorMittal SA, ZARmn (unless otherwise noted)

ArcelorMittal South Africa

ACLJ.J

Target price, ZAR:

5.70

Market capitalisation, ZARmn:

4,359

Last price, ZAR: Potential

3.86

Enterprise value, ZARmn:

4,650

12-month return:

48%

Dec-YE

2016

2017

2018E

2019E

2020E

Dec-YE

2016

2017

2018E

2019E

2020E

Income statement

Cash flow statement

Revenue

32,737

39,022

45,208

42,207

41,727

Operating cash flow

-1,052

-672

5,662

1,323

2,161

EBITDA

190

-315

3,612

2,324

2,320

Growth capex

-335

-322

-61

0

0

EBIT

-1,092

-1,220

2,898

1,533

1,507

Maintenance capex

-1,673

-1,002

-1,248

-1,266

-1,669

Equity accounted income

129

139

137

0

0

FCF

-3,060

-1,996

4,353

57

492

Net interest

-700

-1,441

-1,798

-718

-522

Equity shareholders' cash

-1,863

-2,902

3,096

-460

116

Tax

-19

-2

-331

-228

-276

Dividends and share buy backs

4,500

0

0

0

0

Profit (loss) for the period

-4,706

-5,128

-751

587

709

Movement in net debt

2,637

-2,902

3,096

-460

116

Headline profit (loss)

-2,589

-2,671

905

587

709

Cash flow ratios

HEPS, ZAc

-244

-205

83

54

65

Capex/EBITDA

1057%

-420%

36%

54%

72%

HEPS (Consensus), ZAc

90

48

58

FCF yield

-31.7%

-17.2%

96.5%

1.1%

10.1%

DPS declared, ZAc

0

0

0

0

0

Cash conversion ratio

-0.7x

-1.1x

3.4x

-0.8x

0.2x

Income statement ratios

Equity shareholders' yield

-42.7%

-66.6%

71.0%

-10.6%

2.7%

Working capital days**

20

17

17

17

14

EBITDA margin

1%

-1%

8%

6%

6%

Valuation

EBIT margin

-3%

-3%

6%

4%

4%

HEPS growth

82%

16%

140%

-35%

21%

Calculation of target price (TP)

ZARmn

ZAR/share

Dividend payout ratio

0%

0%

0%

0%

0%

Steel

4,550

4.16

Input assumptions (steel)

Coke and chemicals

4,002

3.66

Other

2,316

2.12

Iron ore - (62% Fe, CIF China) $/t

58

71

66

65

64

Enterprise value

10,868

9.94

Hard coking coal, $/t

144

188

200

190

167

Financial instruments as at 31 December 2017

-1,236

-1.13

Steel sales realisations, $/t

523

665

721

626

606

Net debt as at 31 December 2017

-3,386

-3.10

EBITDA per tonne, $/t

3

-6

60

37

36

Equity value

6,246

5.71

Capex/tonne, $

33

23

22

20

26

Rounded to

5.70

FCF/tonne, $

-51

-35

72

1

8

Share price on 29/11/2018

3.86

$/ZAR

14.70

13.31

13.24

14.00

13.98

Expected share price return

48%

Plus: expected dividend yield

0%

Sales volumes, kt

Total implied one-year return

48%

Domestic sales

3,275

3,302

3,483

3,533

3,588

Export sales

812

955

1,098

998

1,032

Share price range, ZAR:

Total sales

4,087

4,257

4,581

4,531

4,620

12-month high on 28-5-2018

6.08

12-month low on 7-8-2018

1.86

Volume growth

-1.1%

4.2%

7.6%

-1.1%

2.0%

Price move since high

-36.5%

Price move since low

107.5%

Utilisation rate

78%

81%

84%

85%

85%

Calculation of discount rate

Balance sheet

WACC

14.0%

Cost of debt

9.6%

Net operating assets

15,131

12,680

9,131

10,178

10,771

Risk-free rate

8.6%

Tax rate

28%

Investments

-1,104

-1,236

-1,273

-1,273

-1,273

Equity risk premium

6.5%

After-tax cost of debt

6.9%

Equity

13,543

8,058

7,568

8,154

8,863

Beta

1.30

Debt weighting

30%

Minority interest

0

0

0

0

0

Cost of equity

17.1%

Terminal growth rate

3.0%

Net debt (cash)

484

3,386

290

751

635

Valuation ratios

Balance sheet ratios

Dec-YE, $mn

2016

2017

2018E

2019E

2020E

Gearing*

3.5%

29.6%

3.7%

8.4%

6.7%

P/E multiple

-3.6x

-3.7x

4.7x

7.2x

6.0x

Net debt to EBITDA

2.5x

-

0.1x

0.3x

0.3x

Dividend yield

0.0%

0.0%

0.0%

0.0%

0.0%

RoCE

-5.9%

-7.6%

22.5%

13.7%

12.9%

EV/EBITDA

50.8x

-36.9x

1.2x

2.1x

2.1x

RoIC (after tax)

-18.9%

-14.3%

11.8%

3.1%

8.0%

P/B

0.7x

1.0x

0.6x

0.5x

0.5x

RoE

-19.2%

-24.7%

11.6%

7.5%

8.3%

NAV per share, ZAR

12.4

7.4

6.9

7.5

8.1