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FMG re-initiated into BBY Coverage with a Strong Buy

Fortescue Metals Group (FMG) has been re-initiated into BBY coverage with a STRONG BUY recommendation and a price target and NPV of A$7.30/sh, or 10x FY12 or 5x FY14 NPAT. Our valuation and near term earnings outlook are in line with consensus. What is not in our valuation or the market is if FMG can get 100Mtpa of third party iron ore onto its infrastructure adding an immediate A$1-2/sh to FMG’s NPV and target price.