While I appreciate and encourage your contrarian view Alex.shipway (and really genuinely enjoy ShmoShady's humorous posts) I would be keen to know your honest forward looking view for WHC and coal in general. Do you expect the coal prices to go lower? and for longer? and if so not expect supply from higher cost producers to exit the market? or additional demand from emerging (and established for that matter) markets to increase?
From a macro perspective, and with an investment outlook of beyond the next 12-24 months, I am quite bullish coal and WHC for various reasons. These include the aggressive bidding of the last few major asset sales (Blackwater, Daunia, Anglo), the competitive desire for large global steel producers to secure long term supply, the increasing rate of coal fired power station construction (2 per week in China I hear) and significant increase in coal fired power in 2023 and 2024 from the likes of Indonesia, India, Vietnam, Japan, Bangladesh, Pakistan, South Korea, Greece, and multiple African Countries.
There is also the long awaited Indian demand which I believe is coming, as to exactly when, this is for people far smarter than me to speculate. I do however believe this will help offset forward looking subdued Chinese met coal demand at some point. And then there is the whole coal quality discussion and the talk of China's continued reliance on additional seaborne coal for blending and to compliment domestic thermal requirements.
And from a global markets perspective, as you are no doubt aware, there is a huge concentration of funds in certain tech and financials stocks. With priced in or limited upside in these companies (and now negligible dividends) money rotating out of these names through 2025 will be looking for a home somewhere.
I am far from a professional analyst but as a layman my personal opinion is that coal is here to stay for the next few decades, and some of our low cost producers sitting on world class assets should be in a prime seat to benefit from this.
So despite the current weakness in spot price, I see this as a golden opportunity for certain depressed low cost AU producers. WHC SP is now back below where it was mid 2018 when coal prices were in a similar range, but I would argue WHC as a company is a much more compelling buy now. As such I am a happy buyer even if there is further weakness in the SP over the near term. The buyback will also hopefully assist with further SP support.
So all banter aside, and from a macro view without getting in the weeds, I would genuinely be interested in where you think WHC SP will be in 2026/27? and 2030? As we now have a better indication of their balance sheet do you think there is further significant downside risk for WHC? What (realistically achievable) price would you see as a good entry if you were building a position in WHC?
The shorters obviously do not agree, but from where I sit the downside risk is minimal and the potential upside from 2026 and beyond is pretty compelling,
Thanks,
Expand
(20min delay)