If you want to see three shares that have been pummelled by a combination of the Chinese slowdown and the FTSE slump, look no further than Glencore (LSE: GLEN) whose shares had crashed by 69% over 12 months up until the market close yesterday, Ferrexpo (LSE: FXPO) which was sitting on a 75% fall, and KAZ Minerals (LSE: KAZ) with its 61% slump.
But today, all three are amongst the FTSEs top ten risers. So are they finally on the turn and is it time to buy?
Just a week ago, investors were buoyed by Glencore’s equity issue and debt-reduction plans, and on the day the placing results were announced the share price perked up 5% to 135p. Since then the general sell-off has plunged them down as far as 106p on Tuesday, but Wednesday’s rebound added 5% back again.
Attractive dividends
With the price now back up around 110p, forecasts for 2016 put Glencore shares on a forward P/E of under nine, and though forecasts will need to be updated, we must surely be around the bottom, mustn’t we? The crash has upped Gleencore’s potential dividend yield to around 9.5%. That wouldn’t be covered by earnings, but the dividend cash could be slashed by 50% (leaving adequate cover) yet still provide one of the better yields in the market.
Ferrexpo has had a harder time than most. As if being an iron ore producer wasn’t bad enough in today’s environment, last week we had the news that Bank Finance and Credit in Ukraine, which is ultimately controlled by Ferrexpo’s largest shareholder and holds a chunk of Ferrexpo’s cash, had gone bust — and Ferrexpo’s shares lost a massive 46% in the days following the announcement.
At the time of writing they’re back up 8% to 35p, but a recovery is very much open to debate now. Even before the bank crisis, Ferrexpo shares were down 53% over a year, and the firm’s debt situation looks a bit worrying — at the first half stage, net debt stood at 1.9 times the last 12 months’ EBITDA, up 58% from a year previously.
The best of the three?
My third possible turnaround for today is KAZ Minerals, whose shares were up more than 8% at one stage today, to 113p. That comes on the back of a big slump in recent days, and for my money KAZ is looking oversold due to over-reaction to falling Chinese demand for copper and other metals.
KAZ is set for a loss this year, but 2016 should see a return to modest profit. P/E valuations at the turnaround stage don’t mean much, but KAZ shares are trading on a Price to Book Value ratio of only around 0.4 — and that’s very low for the sector. I can see KAZ doing well over the next few shares.