Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Hi James and Team, Interested in your thoughts why NHC isn't rallying at the same rate as Whitehaven and Yancoal? . All 3 paided solid dividends with the other 2 recovering more positely . Cheers Craig
Hi Craig,
It all comes down to go old fashioned earnings and strategic forward positioning:
New Hope (NHC) $4.52 – NHC delivering a weaker-than-expected 2Q result in February suggesting they will struggle to hit their FY24 targets. Weak coal prices were the primary issue with the average realised sales price of A$180.6/t down from $A211.4/t in the previous quarter. However these prices still dropped down to $130.6mn of cash generated from operating activities, i.e. even at lower prices, NHC is making plenty of cash and is forecast to yield ~10% over the next 12 months hence we hold it in our Active Income Portfolio.
Whitehaven (WHC) $7.69 – WHC has enjoyed a resurgence of late including a significant upgrade by influential broker UBS , with their price target increasing a whopping 38%, from $6.30 to $8.70. The crux of their upgrade was a bullish update towards metallurgical (Met) coal used in steel production, courtesy of good old-fashioned supply and demand dynamics. WHC has changed the profile of its coal-mix with metallurgical coal becoming the primary driver of revenue, accounting for around 70% of sales after last year’s $6.4 billion agreement to buy BHP’s Blackwater and Daunia mines.
Yancoal (YAL) $5.46 – A solid Chinese owed coal business which we don’t follow too closely but its forecast dividend in excess of 10% over the next 12-months cannot be ignored but we prefer NHC as a “yield play”.
We prefer the way WHC is evolving their business and it appears the market agrees at this stage.
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