Ann: Yancoal to trade in China via Stock Connect, page-14

You’re right in your reading of the low PER and high dividend rate. There are many other positives as well, including the fact that YAL has wiped out its (previously high) debt, and has a competent leadership and management team.

On the risk side, the company’s continuing fortunes depend significantly on a continuation of the current (historically high) coal price. If the (thermal) coal price stabilises at around US$200 and stays there for a few years (as many but not all of the pundits expect), the recent flow of goodies should continue. On the other hand, if the coal price were to return to less than US$100 the good days would be over, at least for the time being. Continuing high demand for coal and significant supply constraints support the majority view.

Another significant risk is sovereign risk, both domestically and internationally. As another poster noted, YAL is majority-owned by a Chinese energy company — over which the CCP of course has a major influence. Domestically, Queensland last year raised the royalties charged on coal sales to world-highest levels, and there is no guarantee that other State governments won’t follow suit (e.g., NSW post the coming State election). There’s also the nonsensical ‘coal reservation policy’ introduced by NSW, and the constant threat of further curbs on new coal mines and coal mining generally by green-obsessed environment Ministers (such as Plibersek).

In short, there are lots of pluses and reasons to be optimistic about YAL, but also plenty of risks and challenges. A rewarding investment, in my view, but not for the faint-hearted!