Deterra Royalties Earnings: Strong Iron Ore Prices Drive a Solid Result

We retain our fair value estimate of AUD 4.40 per share for wide-moat Deterra Royalties with first-half fiscal 2024 earnings broadly in line with expectations. Adjusted EBITDA of about AUD 113 million was 24% higher than last year, driven by stronger average iron ore prices offsetting modestly lower sales volumes from Mining Area C, or MAC. Net profit after tax of AUD 79 million or AUD 0.15 per share, also rose 24%. The fully franked interim dividend of AUD 14.89 cents per share to be paid in March represents a 100% payout ratio consistent with its policy. We forecast a similar payout for fiscal 2024 for a fully franked yield of about 7%. With no debt as of the end of December 2023, Deterra’s balance sheet is pristine.