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Cameron: Welcome back to QAV America tk. This is episode 12 of QAV America. It’s been, uh, it’s been the end of the financial year in Australia. Tony. I know Americans probably won’t appreciate this, but for us it’s the beginning of a new financial year. We’re recording this on the 1st of July, 2025. And, uh, now Australian show that we just finished, I did talk about our US portfolio.

So

Tony Kynaston: Mm-hmm.

Cameron: List, it’s just the last 12 months. You don’t have to think about it as a financial year, but. It closed up about 28.5% for the last 12 months versus the s and p 500, which was up about 13.6%. So good year for our US portfolio. Not as good as it was months ago pre-Trump when we were up about 60% for the year already.

But you know, I’m not gonna [00:01:00] turn my nose up at a 28% for the year. So.

Tony Kynaston: Correct. What would Bill, what would baby, what would Baby Billy say about that Cam?

Cameron: say, come on now. now, baby Billy from the Righteous Gemstones. If you haven’t watched that TV show, uh, Danny McBride show. Love it. Just finished. Great show. Um, Tony, uh, also on our Australian show, I mentioned the Z score. And we, we talked a lot about Stockopedia in the Zed score and whether or not we want to keep it in our checklist or not, we decided to rip it out that, uh, it is gonna come up in the pulled pork I’m gonna do today on Korean Steelmaker, or posco. uh, just for any US listeners that are using our checklist. I’ll have a new version up this week where I’m gonna rip out the Zed score. It’s, uh, ZED scores, the ZED scores for manufacturing, the [00:02:00] ZED scores for non-manufacturing, and they don’t apply for financials. And it’s very busy and it’s very messy. And we just decided we have enough other financial metrics that we’re using to assess these companies. And we have our sell triggers if they start to go south, both for the commodities and also for the. Business itself, its share price. So we think we’re pretty well protected. We don’t need the extra layer of protection of the Z bankruptcy So we’re gonna be removing that and you can get a new version of our checklist if you’re using it sometime after this episode comes out.

Tony Kynaston: I just, just one thing to add. Um. I mean, you did reconcile the Zed scores to the Australian checklist that we were using from a different source, and they were a bit all over the place, but the F score was a much better match for what we had been used to for the last five years. So I’m, you know, confident that the fco, uh, fine.

And there’s nothing wrong with the Zed score, but we just couldn’t get it to [00:03:00] correlate with what we were seeing from the other data sources we’d used before.

Cameron: And partly as we said on the Australian show, partly that’s because the original Z score, which was developed in the sixties was looking at manufacturing companies and we don’t have a lot of manufacturing companies end up on our checklist in Australia.

Tony Kynaston: Mm-hmm.

Cameron: a lot of manufacturing companies ending up in our buy list.

1. In the US that are based in the US either, I mean. I dunno if we could maybe say Ford as a manufacturing business, I guess, but probably not. one I’m gonna do today is based actually in Korea. It’s just got an a DR on the, uh, New York Stock Exchange. So, um. But it is, but there’s just too many messy variations of it for our purposes, and I don’t think it’s worth the effort and trouble it would take to reconcile all of them for all of the different stocks that we have in terms of us, uh, market news, Tony. Um. You know, it’s this [00:04:00] sort of the 90 day tariff pause is coming to an end. Supposedly lots of countries are trying to sign deals with the us whether or not those deals are much different to the deals they already had in place before Liberation Day. We’ll find out when we know more, but the big beautiful bill is still yet to pass through the Senate. Our old friend Elon Musk, has become a little bit vocal again in the last few days against the bill. I’m not sure if he had the Neuralink chip taken out or put back in or rebooted or upgraded, I think it was glitching for a few

Tony Kynaston: Right. He walked past a big magnet. Yeah.

Cameron: Yeah. Um, oh, I gotta, so you, this is completely got nothing to do with investing, but, um, do you know who Bob Ezrin [00:05:00] is?

Tony Kynaston: I do not.

Cameron: One of the greatest record producers of all time, uh, in the seventies. was the producer behind some of Lou Reed’s best albums. Alice Cooper’s Best albums, Kiss’s Best Albums, uh, was one of the great record producers of the seventies, but he also produced. The wall for Pink Floyd, and I was watching a bit of an interview with him the other day talking about the production value of the wall.

And you still, you put it on E listen today, something like comfortably numb and it’s just magnificent, the sound and the ambiance and everything. And he was going into great detail in this talk, talking about magnetic tape, and he said when they recorded the Drummond bass. Four comfortably numb. He said, we, we, we made one copy of it, which was a mono copy to put in on our 24 track.

He said, we recorded it on a 16 track, we put it in a safe and locked it away [00:06:00] for months and months and months and didn’t listen to it. He said, because every time you pass a magnetic tape over a tape head,

Tony Kynaston: All right.

Cameron: It’s deteriorating, it’s pulling atoms, shredding atoms off of the tape, which lessens the quality.

So we had this really dinky mono version of it on our 24 track that we were using as the backing track. then right at the end, they’d used all the other tracks on the 24 track They, and so they had to delete the drum and bass. Backing track and pull this one out of the safe and put it in. So it was had this pristine quality to it, but he was like so deeply passionate about talking about. Magnetic tape and atoms and all of the stuff to get this quality. I really, I dug it. It was really, really cool. Anyway, back to Elon. Yeah. Elon Elon’s, chip Malfunctional, he took more ketamine, less ketamine. I dunno what’s going on. But, uh, anyway, he’s saying, he’s now saying in the New York Times today is covering this, that [00:07:00] he is promising a new political party if the G-O-B-G-O-P bill passes his new America party. That will challenge Republicans. Um, so it’s back on Trump 2.0, 3.0, whatever 0.0 this is, I’m not sure how many iterations of their relationship we’ve had in the last year. They hated each other, then they were best friends, then they hated each other. Then they’re okay again, and now they’re gonna war again.

So watch this space.

Tony Kynaston: And meanwhile, the share market just chugs along, doesn’t it?

Cameron: Share market does, but the dollar’s not too great. The dollar’s had its worst start to a year since 1973. Continues to slide. Even as President Trump has backed down from his tariff threats and the US stock market has recovered from its losses. According to the New York’s Times, United States currency is weakened more than 10% over the past six months when compared with a basket of currencies from the country’s major trading partners. [00:08:00] The last time the dollar weakened so much at the start of the year was 1973 after the United States had made a seismic shift that had ended the linking of the dollar to the price of gold. So not a good thing for the US economy.

Tony Kynaston: Well, yes and no. It’s not a good thing if you are buying overseas items and you’re living in the us but if you’re exporting them, it’s a good thing they become cheaper to your customers. So, um, depends how you look at it.

Cameron: that’s right. There’s always two sides of the

Tony Kynaston: Mm-hmm.

Cameron: the FX coin. Well, speaking of which, unless you’ve got any other US news, I’ll get into my pulled pork.

Tony Kynaston: No, please do I, I do.

Cameron: Well, this is another, uh, foreign company, as I said, and a fascinating one. Uh, again, I really learned a lot of stuff about businesses I didn’t know and countries that I didn’t know. And I’m gonna gonna take us down a couple of [00:09:00] rabbit holes, historical rabbit holes. I hope everyone’s got their. Um, comfy pants on ’cause we’re gonna, gonna do a Cameron pull pork, which is a lot of completely irrelevant, slightly connected historical dive. I said, this company’s called Posco POSCO Holdings. A DR Outta Korea on the New York Stock Exchange. We talked about ADRs a bit last week. There a behemoth Korea’s steel behemoth cranking out roughly 40 million tons of crude steel a year out of the pong and guang yang mills. Plus they have diversified now into battery materials, LNG, and a construction business, but 75% of their revenue still comes from churning at steel. one of the battery side of things is an interesting lithium processing plant. Uh, [00:10:00] in, you know, taking brine and converting it into lithium in Argentina, which they’re, uh, about to, I think it’s about to go into production this year. Got more on that. Later on. They’ve got some green hydrogen projects like our friend Fortescue Metals. they’re doing a lot of, um, green steel, green energy stuff as well as steel production. Quite diversified, but mostly steel. Steel according to their website, and I did confirm this in other sources, they have been voted World Steel Dynamics, WSD. The world’s most competitive steel maker for the last 15 years.

Running 15 consecutive years is the world’s most competitive steel maker.

Tony Kynaston: What does that mean?

Cameron: that was the question I had. What does that mean? Do they have like relay races and

Tony Kynaston: Yeah,

Cameron: out there? High jump [00:11:00] swimming, triathlon? What do they do?

Tony Kynaston: yeah. Steal Olympics.

Cameron: It looks at a bunch of different things. It looks at, uh, yeah, how much they produce and dollar cost and all sorts of different things that I’m not gonna go into ’cause it’s really boring.

But apparently it means that they’re very, very good at making steel or is really what it means. They also run the world’s largest integrated steelworks in Guang Young in Korea. And they are the world’s seventh largest steel producer. whether or not they will still be that when Nip on Steel buys US Steel, I’m not sure if that makes them

Tony Kynaston: Mm-hmm.

Cameron: or eighth or somewhere in that vicinity.

I’m not sure how that’ll break out, but that’ll, up there. They’re not the biggest producer in terms of output, but they’re, um, one of the biggest in the world. In 2020, they became the first [00:12:00] Asian steel maker to commit to net zero by 2050. So they’re really pushing hard on low carbon steel making with their hydrogen iron making process, et cetera, et cetera.

They’ve got a technology called hix, uh, which is a hydrogen reduction iron making technology. They’ve also got a thing called fine X, fine X and Um, but the background of the company is interesting. So they started off as a state owned company, 1968, when the dictator of South Korea hun, was sort of revolutionizing the Korean economy, the economic miracle of South Korea. Uh, basically he realized they needed to have, uh, independence in terms of steel, something that [00:13:00] the Chinese were trying to do. At the same time, uh, they were relying too much on foreign imports. They needed to have their own, uh, manufacturing capability. So they borrowed money from the us, from the IMF, from Japan.

They got in a bunch of engineers from the us, US Steel Engineers. And built their own steel manufacturing capability. Uh, according to company legend, when they were about to get ready to roll their first steel, there was this, um, foreign exchange crunch that was happening in South Korea. They’d basically run out of USD to pay for imports.

They were importing so much the founder of. What was then known as PO Hang, iron and Steel, park Jun, uh, who was hand selected by Pshe to run this. They were old ex-military buddies. He had to, uh, pawn [00:14:00] his own medals from the Korean War order to. Meet the payroll and then they got them back somehow.

And legend says the workers melted them into the first steel pour out of the factory. Can’t really back that up, but, uh, that’s the, some of the mythology behind the company.

Tony Kynaston: So, so, so he poured these metals, got them back, and then the worker said, Hey, give us the metals we’ve gotta use for them. Yeah.

Cameron: yeah,

Tony Kynaston: Yeah.

Cameron: gonna melt it. We, we, we just, we we’re short for the first pour just by of grams of metal.

Tony Kynaston: Right.

Cameron: Uh, but I wanted to just drill down on the story of Park Chiney be and his dictatorship of, ’cause I’m, I dunno how many people listening to this are aware of South Korean history.

But because I’ve done a lot of history episodes on. The Korean War on my Cold War show, I know a little bit about this, mostly forties in the fifties, but a little bit into the sixties in the seventies. [00:15:00] So Chuck, uh, chuge was the third president of Korea, but he seized power in a military coup in 1961.

It’s known as the five 16, um, military coup as the 16th of May, 1961. And then he basically ran a military junta for a couple of years, and then was elected president in 1963 and stayed there until he was assassinated in 1979. I think a lot of people in the West think of South Korea as the good, nice, happy. Uh, Gangam style, K-pop band, Korea and North Korea is the one run by military dictators. When South Korea was run by military dictators up until very, very recently, and then when it became a democracy, I. It, uh, uh, has put nearly every president into jail that it’s had, they’ve either committed suicide or they’ve been put in jail since [00:16:00] the,

Tony Kynaston: I dunno.

Cameron: when they sort of tried to clean up their act, including Park Hay’s daughter. I’ll get to that. So I. Um, he, he ran South Korea in this period, in the sixties and seventies when it really did explode as an economic miracle. He was very, very tight with the us, a lot of us money in there, a lot of Japanese money in there. it was also the era where they saw the, the foundation of the.

Uh, cha Balls, the run firms that include these days. Hyundai, lg, Samsung, the, the Korean version of the, um, Japanese ISU companies. Right? Um, he was a general in the South Korean army, uh, when he did the coup in 61. Then. W became whether he had elections again a couple of years later, was the president until the early seventies when there started to be some serious political opposition. Then he did a self coup. It was my favorite kind of coup is the self

Tony Kynaston: A self food

Cameron: Self [00:17:00] coup. Yeah. You ever heard of a self coup?

Tony Kynaston: I have. Uh, is that like a suicide squad? Like

Cameron: no. Well,

Tony Kynaston: No. Okay.

Cameron: everyone else in the government except yourself. So, um, he was the

Tony Kynaston: That’s just cleaning house for a dictator though, isn’t it?

Cameron: Well, yes, but he had been elected president. Supposedly they had, it was a democracy. They had the third Republic, I think it was called at the time. But uh, then he was like, you know what? To hell with all this republic nonsense and just turned it into a dictatorship again.

So it became a dictatorship. He declared martial law ruled as a dictator. I think Trump’s been studying his biography pretty, pretty closely, and then he was assassinated by his close friend. Kim Ja, in 1979, he was the director of the Korean CIA. Uh, he’d been put into p Power by the president or the, the dictator as he was then, and, [00:18:00] um, they sort of had a falling out.

The, the president had appointed the, this other guy called Kim, who was the, uh, also called Kim, who was the head of his like security service, like the. Presidential Security service and he and the head of the CIA, um, hated each other and there was a banquet. the president used to throw lots of banquets.

He threw like 10 banquets a month. ’cause you know it’s good to be the king. And they were at this banquet and, and the president and the head of his security service were both just insulting the head of the CIA, the Korean CIA. And, um, he just, he left the room, went out to his guys and said, all right, we’re doing it.

And he went in. the president, killed the head of the security detail, his guys outside the room killed the bodyguards, killed the presidential chauffeur and tried to get away with it, but they didn’t, and they all got arrested. [00:19:00] The guys, the head of the CIA was executed by hanging, uh, in 1980, but the park’s daughter, the president’s daughter, uh. Ended up being the 11th president of South Korea 2013 until she was impeached and convicted of corruption charges in 2017. Sentenced to 32 years in jail, uh, but then got, uh, given a pardon and released a few years later by the incoming president in 2021. So she was released in 2022. But, um, a couple of months after her dad did the coup, he, um, assigned Park Jun as the chief Secretary the National Reconstruction Council and then him in charge of building the steel [00:20:00] business.

So that’s how it was the dictator. it was a military junta at the time who put this guy who’s an old army buddy of his in control of building what is now posco, the steel business, the friendly, environmentally friendly steel business. So that’s my South Korean history lesson for the day.

Tony Kynaston: Oh, thank you.

Cameron: self COOs, assassinations, corruption for daughters. remember when that case was going on. It was bonkers. Like all the, if, if you want a fun, read one weekend, just look up the history of all the South Korean presidents in the last 20 years. just mad. All the

Tony Kynaston: Okay.

Cameron: and suicides and, uh, all of it’s dirty.

Tony Kynaston: Haven’t they, they had a replay of some of that recently with the, uh, didn’t someone declare martial law and then get removed and

Cameron: yeah,

Tony Kynaston: back in? Yeah.

Cameron: yeah, yeah, yeah. It’s going on all the time. It’s completely

Tony Kynaston: Hmm.

Cameron: Anyway, [00:21:00] um, company just grew really, really quickly, uh, in the seventies. Did really, really well. I. Ended up struggling in the late nineties when the Asian debt crisis hit

Tony Kynaston: Mm-hmm.

Cameron: and they ended up being privatized by the South Korean government. That’s when they listed an A DR on the New York Stock Exchange fully pri uh, for early stage of it the, uh, of the privatization. The Korean government still owned some stock and it was fully privatized. Eventually, I think

Tony Kynaston: Right.

Cameron: something like that. Then in 2022, it spun into Poco Holdings and they pledged that Non-steel profits would hit 50% of group earnings by 2030 they would triple the market cap. currently about 25% non steel, so they’re getting there, still is still three quarters of it. As I said earlier. They’ve had a [00:22:00] few issues, uh, over the last couple of years. If you look at their share price, it’s taken a big hit in the last couple of years, largely down to two things as far as I could tell.

One was finer demand. they’re a bit like, I think over 30% of their exports go to China. A lot of it goes into domestic stuff, but, um. Good chunk of it. Third of it goes to China. And in Australia we know that when, uh, China’s manufacturing slows down or their construction slows down, how it impacts like iron ore in this country, in uranium to a lesser extent, but mostly iron ore. And same with these guys. Whenever China’s, uh, puts a bit of a halt on these sorts of things, it impacts their business. But then there was a massive typhoon. That hit South Korea in 2022 and their mills were basically flooded shut. of the main, uh, places mills up [00:23:00] for 76 days. So in 2022, combination of China and that their operating profit fell 46%. Half of that was due to the flood shutdown. They took a 1.3 trillion one impairment sweep in 2024. Korean W for people wondering what a w is. And

Tony Kynaston: Well, how much, what’s a one worth?

Cameron: what do, do you want? Uh, it’s, uh, God, ask me that. I have

Tony Kynaston: I will look it up, or you keep going. You keep going. I’ll look it up

Cameron: Uh, I’ve got my, yeah, I did have, I had to do the bloody calculation

Tony Kynaston: and a bit.

Cameron: like last week’s it, um, threw some of my numbers out. Hold on, let me open my spreadsheet. I should have those numbers in front of me Anyway.

Tony Kynaston: Ooh, 0.00074 US dollar is one South Korean wine,

Cameron: [00:24:00] That’s it. Yeah.

Tony Kynaston: so one US dollar is about 1,350 Korean wine. I.

Cameron: don’t have to talk trillions. So, uh, let me see. Where am I? So they, they’ve had a rough couple of years. Um,

Tony Kynaston: it’s pretty hard to operate a steel furnace when the place is flooded, isn’t it? It’s.

Cameron: look, I don’t know that much about steel manufacturing Tony, but one would think could be, could be tricky. I wanna talk about some of their other lines of business though, ’cause some, some interesting stuff going on. Um, I mentioned they’ve got infrastructure, which is energy trading, and there’s also a construction arm there, Battery materials is interesting too. We’re gonna talk about lithium a bit. Lithium, by the way, mentioned on the last show is a buy on our commodity, uh, tracker. So it means that we, if we had lithium [00:25:00] stocks in our checklist, which we don’t in the in Australia, but if we did. could buy them. These guys wouldn’t be a lithium buy for us ’cause majority of their revenue is still coming outta steel.

But steel is also a sell, as you pointed out in our last show. So we wouldn’t actually buy these guys at the moment. We would wait for steel to become a buy again. But, uh, I’m talking about ’em anyway because why not? ’cause it’s hard to find things to. Talk about on our US buy list that aren’t shipping companies, or financial services companies, which were the first two that I looked at again this week were financial services and shipping.

And I was like, no, not going there. Again, they own a bunch of gas fields. They’ve got this full LNG chain. They go upstream, gas fields, Myanmar in Australia, a place called Cenex, and in Malaysia, the Lion Basin. They pipe the gas to Inchon and Guan Yang terminals, they sell it via its trading desks and [00:26:00] um, you know, keep some of it to burning in, uh, South Korea. But basically they own a whole bunch of LNG related business, which is starting to do quite well and is growing. is seven. M-T-P-A-L-N-G turnover in 2000 and by 2027 MEGATON per annum. I think. Don’t ask me what MT stands for, but it’s a lot. They also have, uh, a trading arm. They trade steel non-ferrous metals, grain motor core parts to over 80 countries. sales were roughly 23,000,000,000,001. Quickly convert that to USD for me, Tony.

Tony Kynaston: Divide by 1300.

Cameron: I dunno,

Tony Kynaston: Dunno.

Cameron: but, uh, it contributed about 55% of, [00:27:00] uh, no, sorry, energy contributed about 55% of the operating profit for this division this year. I. Last year, Um, volumes were good in Myanmar and its first full year liftings from Cenex Australia. Were good, which offset the weaker commodity prices. know what LNG is like.

It’s up and down like a bride’s 90 at the moment. As is crude, as are of

Tony Kynaston: Mm-hmm.

Cameron: To be honest, the world’s commodity markets are kind of shaky at the moment. So, but they’ve got this Malaysian thing coming online too this year. They’ve also got this, um, they’re like construction business. Uh, they design and build steel mills, coke ovens, both internally and for external clients. Lithium cathode plants, l and g tanks, power plants, domestic high rise apartments and civil works. So it’s a whole other arm [00:28:00] of the company that’s doing quite well. Uh, although the amount of work that they have apparently swings pretty violently. But um, you know, that’s the nature of large construction projects.

I guess. You win them and they have a big ramp up time and you’re locked in for a couple of years. Why it’s working and why it’s cheap. So despite all of the issues that I mentioned earlier with in China, et cetera, they’re pulling in a ton of cash. So they, in 2024, they pulled in 7.2 trillion one of operating cash, which is roughly 5.3 billion US dollars. And they have a price to operating cashflow of about 2.6 times, which is

Tony Kynaston: Wow.

Cameron: buy list. So

Tony Kynaston: Hmm

Cameron: cheap from a cashflow perspective.

Tony Kynaston: hmm.

Cameron: And [00:29:00] they’ve got a couple of, I dunno if these are moats, but a couple of significant edges that may not be being taken into account in terms of their valuation. I mentioned the Guan Young Meal. It’s number, it’s the world, the, sorry, lemme start again. The Guan Young number three mill. They’ve got a couple. There is the world’s largest single blast furnace, and the scale of it enables them to underprice most of their competitors, which maybe is why they win their most competitive steelworks. um, title that were mentioned earlier by 20 to 30 US dollars a ton. despite what my wife told me, size does matter. Tony, when it comes to steel plants. uh, they have the proprietary low carbon tech that they’re pushing hard on, which means that. [00:30:00] They can, um, compete in low carbon. Projects where you know, people are insisting that you

Tony Kynaston: Mm-hmm.

Cameron: carbon solution for your manufacturing or delivering steel, and they’re also of an iconic company in. South Korea. So the fact that they’re not state owned anymore doesn’t mean that they’re not sort of protected, as I understand it by the, um, Korean government. If they get into sticky times, commonly believed that the South Korean government would probably give them a cozy bailout if anything really, really bad happened. So despite having a relatively low Z one score about 1.8. Whether or not they’re an actual bankruptcy risk is debatable. I mean, they could take a big hit. We know [00:31:00] that when governments come in to bail out, it’s not necessarily a good thing for shareholders, but we have, we have our for getting out of things before they

Tony Kynaston: Yeah.

Cameron: it’s happens overnight and you, you know, can’t get out, that’s always a risk. Um, why it might be wearing a discount? Uh, China is apparently over capacity at the

Tony Kynaston: Right.

Cameron: steel and construction, all those sorts of things. At the moment. The lithium price collapsed, but as I said, it’s just starting to turn around again

Tony Kynaston: Mm-hmm.

Cameron: You know, we’re, um, tracking that steel is still a sell though. to reiterate that. And the 2024 impairment, san operating profit by 38%, the Altman ratio, as I said, probably scares some of the quants off, but it, it’s also got, you know, some, it’s got the volatility of the US tariff staff. Big tariffs

Tony Kynaston: Mm-hmm.

Cameron: like 50% nip on steel buying US steel, what that’s gonna mean for them [00:32:00] to be able to export to the US market, although they do have some plays in that, which I’ll get to in a minute. I just wanted to talk, uh, a little bit about the lithium play. So there’s this place in Argentina that they’ve bought called Sal Dior. It’s brine. Now I know nothing about this, uh, about how lithium is produced, but basically you can take salty water and turn it into lithium. Um, apparently it’s how it works. They aim to produce, I. 23,000 tons per year of lithium carbonate starting in 2025. 2026, they have a goal to get a total production capacity of a hundred thousand tons per year of both lithium carbonate and lithium hydroxide. And that’s apparently a big deal. So basically you take, so there’s lithium in salt water.

You got GPT to gimme a breakdown on this. I’m not gonna go over it in too much detail, but essentially [00:33:00] water, a lot of lithium that’s come out of. You know, hard rock substrates over millions of years and it, um, can get processed. Basically, you, you process all of the elements out of the salty water, rid of all of the stuff you don’t want, which you probably sell borax and things like that, but you can end up refining it down to lithium.

So that’s what they’re doing happens in wa in Australia, Western Australia, our lithium, um, salt water. Plant or operations there, mines there uh, these guys have been doing one in Argentina. The other thing to note with these guys is they’ve got a 100 billion, one buyback program where they’re buying back 6% of stock by 2027. So that’s a big chunk, 6%

Tony Kynaston: Mm-hmm.

Cameron: In terms of the risks though, um, I just wanted to go into [00:34:00] more detail about the tariffs. So Korean steel shipments to the United States fell more than 16% in May from the previous year, export prices were down over 9%. As a result of, uh, Trump’s tariffs, to remind people, the US government began imposing a 25% tariff on all steel and aluminum imports in March, and then doubled the rate a couple of weeks ago to 50%. Whether or not it’s a taco tariff or not, we don’t know yet. We’ll see what happens. But Korean steel exports to the US dropped. 16% to 327 million in May from 390 million a year earlier. Um, but in March Hyundai, Hyundai Steel announced plans to invest 5.8 billion to build an integrated electric arc furnace based [00:35:00] steel mill in Louisiana by 2029. And POSCO is investing in that. So. They may have a US option a few years from now, but that’s not gonna really help them in the next four years. And people may have heard, I mentioned it earlier, the Trump administration seems to have given some sort of green light to nip on steel outta

Tony Kynaston: Mm-hmm.

Cameron: US steel. I’m not sure the, the, the details of the deal have really been released yet, but, uh, is expected that that is going to provide some more competition for, you know, that’ll be obviously generating it out. It’ll be a domestic production as US Steel already is, it’ll have more money beefing up domestic production outta the us, which will make it harder for these guys to compete. So they’re struggling in the us. They’ve got some challenges in China. [00:36:00] Um, you know, it’s, it’s, it’s messy, but don’t predict the future. We don’t predict how these things are gonna play out. We are looking at the numbers as they are, and to drill into some of the numbers as they are, as I mentioned, price to operating cash flow 2.6 times, it’s pretty cheap.

From our perspective. The dividend yield is 3.86%, which is. too bad. Uh, the Petrovsky F score is five out of nine, so it’s above our hurdle for Petrovsky. I’ll get into the scoring in a minute. The Zed score, as I mentioned, it’s a Z one because it’s manufacturing. It’s a 1.8, which is kind of a warning level.

It’s not

Tony Kynaston: Hmm.

Cameron: level, it’s warning, but again, we kind of ignore that. Price to book is 0.34 times.

Tony Kynaston: Ooh.

Cameron: really, really cheap on a price to

Tony Kynaston: Hmm.

Cameron: as well. You’re basically buying hard assets. Mills, lithium [00:37:00] brine, LNG steaks at about one third of the book price.

Tony Kynaston: Hmm.

Cameron: You know, from our perspective, it looks like a crazy deal. You know, Mr. Market could be a whole bunch of things like tariffs in China and further impairment costs that haven’t hit the books yet that we don’t know about, but. From what I can see with the numbers as they sit today, it looks like a well run business that’s throwing off tons of cash that we can buy pretty cheaply, and I don’t see it disappearing overnight for all the

Tony Kynaston: Right.

Cameron: earlier.

Tony Kynaston: if I can just throw my 2 cents worth in, and I dunno a whole heap about international steel markets, but I have owned BlueScope Steel in the past, which is an Australian steel company and. It strikes me that tariffs are kind of just another version of what’s happened [00:38:00] internationally in steel markets For a long time, uh, it, uh, tariffs kind of went away, but then I know in Australia, for example, they’ve relied on anti-dumping legislation that the, at, um, various international courts to try and stop.

Companies from overseas dumping steel into Australia, which is kind, not exactly a tariff, but it’s kind of equivalent. It’s trying to, you know, um, favor the local producer over someone who can do it cheaper from overseas. So, you know, I, I imagine that a company who’s been playing in this market for a long time has experience with dealing with tariffs and dealing with international issues.

So, um, even though, you know, as you said, their sales are down to the us, they’re. They probably gained different scenarios to take that into account and, and you know, maybe diversification to lithium’s one of them. But, um, it, it, I guess my point is tariffs aren’t the new thing for them [00:39:00] and they’re still standing and as you said, they’re throwing off lots of cash that’ll probably keep standing.

Cameron: I think the big question is how much Trump coin have they bought? Um, that’ll probably be the deciding factor I think, of how they’re treated. Yeah. So, uh, basically cheap cash gushing steel dinosaur mutating into a battery materials Phoenix. yes, ChatGPT did write that for me. Um, it’s, it’s, it, it’s, it’s an interesting play.

Um, but again, red flags China. Uh, war could chop it in half too. If China starts making their steel cheaper, uh, both domestically and internationally. Tariffs, fx, blowups, all sorts of things could go wrong

Tony Kynaston: Mm-hmm.

Cameron: it, we don’t [00:40:00] predict the future. Um, if I go through the numbers, oh, by the way, it has. Uh, it has a kind of a three point upturn, which I

Tony Kynaston: Mm-hmm.

Cameron: didn’t score for it because when I look at the ator for new listeners, that’s our charting tool. It, um, it looks like it actually breached the byline just before their March results came out. But effectively it was just, uh, you know, it’s, it’s sort of line ball.

So I would score it for, if I was gonna manually score it, I would score it for that. So it’s score what, it’d be even better than it is I had to, it. It also scored better before I had to factor in the W to USD conversion for our intrinsic values. Um, but it still came out quite positive. So if I run through the scores one by one, yes, it’s got a. Positive, uh, sentiment. Average daily trade, by the way, [00:41:00] is uh, uh, 16 million. I think that’s, that’d be USD, so it’s pretty big. Um, price operating cash price. Operating cash flow 2.64. Quality rank in stock. Edia is, uh, 68. So we did score it for that. It’s above our cutoff of 60. Stock rank is only 74 below 90, so I didn’t score it for that. score, as I said before, is, uh, good. It’s uh, five, so it’s above our cutoff of 4.5 gets a score for that. It doesn’t score for Zed. Score doesn’t score for TK IV number one or IV number two. Uh, because when I recalculated those, they were below the share price. I think IV one is $32, IV two is $54, the price is currently around about $48. [00:42:00] Um. Well that is less than 52, isn’t it? 50 foot,

Tony Kynaston: Mm-hmm.

Cameron: for that one. Sorry. My mistake. Should get a score for that. Um, price is less than, book price is less than book plus 30. Uh, it didn’t score for new three point upturn, but I would give it one, two, if I was doing it manually. Growth over pe, growth over PE is not greater than 1.5. value growth is positive. PE is not less than the yield, couldn’t score it for that. Yield is than the bank debt, couldn’t score it for that mortgage rate. Um, the IV number two is not greater than two times the current share price, so it wouldn’t score for that. All in all, when I did it, it had a score of, uh, 10 outta 16, but. would probably have 12 outta 16 [00:43:00] if I was gonna redo it manually as it was. It got a quality score of about 62 and a QAV score of 2324, so

Tony Kynaston: That’s pretty good. Yeah.

Cameron: one of these ones that, you know, yeah, it has all sorts of problems and all

Tony Kynaston: Mm-hmm.

Cameron: be a problem, but at the end of the day, very old business throwing off a ton of cash.

Seems to be very well run. And really cheap by our metrics. So I like it. Except steel is a not in a buy state at the moment. You can buy it anyway if you don’t give a, don’t give a shit about steel commodities, but you know, commodity price. But we would tend to wait until

Tony Kynaston: Mm-hmm.

Cameron: turned back up and became a buy again.

But, um, check it out, have a look at it. Keep an eye on it. I think it’s a good one.

Tony Kynaston: I think you can. It’s interesting to learn about Korean steel makers and Korean chabos and Korean dictators. [00:44:00] Very good.

Cameron: and assassinations and self cos

Tony Kynaston: Yes.

Cameron: you learn about self. Cos today. Tony.

Tony Kynaston: Mm-hmm.

Cameron: Alright, well can hear my doorbell going. That’s weird. Uh, that’s all for the. QAV America Show today, Tony. Um, we’ll be back next week with a see what happens in the new financial year in our US portfolio.

Tony Kynaston: Yeah, have a good week.

Cameron: Thank you, Tony. You too.

Tony Kynaston: All right. Cheers.

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