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    Media speculation on NHC

    Hi MM, Another stock report I subscribe to mentioned that media speculation NHC would bid for unlisted Malabar Resources which it currently holds 23% of was a cause of its recent share price drop. The increased dividend and 12 month share buyback has probably downgraded that possibility short term. However, longer term if NHC were to go down that path, what sort of price would be required and would you think that dividend cuts and possible capital raise would be required? Thanks Peter

    Answer

    Hi Peter,

    Its hard to get a definitive valuation on  unlisted Malabar Resources (MBCAO) but in August 2022, New Hope (NHC)  acquired a 15% stake in Malabar for A$94.4 million, implying a company valuation of approximately A$629 million at that time. Interestingly after a tough few years Whitehaven and New Hope are back to levels where they were trading in the 3rd quarter of 2022.

    • In in February 2024, Malabar Resources successfully raised $180 million in equity, valuing the business at ~$1.1bn.

    Hence our “best guess” is NHC would need to pay ~$1.5bn to acquire Malabar but if they were considering such a move in the foreseeable future their recently announced $100mnn share buyback makes no sense even with the miner holding ~$800mn of net cash. However, coal prices are depressed as are stock prices in what is still a cyclical market so never say never.

    • Such a purchase could see a dividend cut as was the case when WHC bought BHP’s assets but at the right price it makes sense.
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    New Hope Corp Ltd (NHC)
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