WHC is still down -26% in 2023 but it has at least bounced ~25% from its June low as coal prices stabilised under $US150/MT. We liked the lack of nasty surprises in their quarterly production update this week i.e. after returning A$1.6bn in FY23, net cash ending FY23 is strong at A$2.7bn which will deliver ~A$500m payouts in FY24E and inorganic/organic growth opportunities with some of BHP’s assets up for sale i.e. if the world wasn’t committed to a green future the stock would be trading above $10.
We are looking for a further ~$500mn in buybacks over the coming year, plus the purchase of BHP’s assets helped by WHC’s strong balance sheet and organic builds/growth of existing assets. The main risks for WHC come from industry headwinds to approvals and permits, but this in itself remains supportive for existing suppliers i.e. no new supply coming online which is ultimately the main driver of this trade over the next few years.
- We remain optimistic toward WHC with an initial target close to $8.
MM is long and bullish WHC
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NB We hold WHC in our Flagship Growth Portfolio.
