rising coal volumes to benefit chl

CCI Holdings (CHL) Australia's largest coal testing service provider stands to benefit strongly as the market enters a period of strong growth in coal export volumes. CHL derives revenues predominantly on a per tonne basis and will see profit growth on the back of continued strong demand for coal particularly from China. Today, Newcastle coal port announced it expects to export 88MT of coal for calandar year 2006, after achieving 80.3MT in 2005. But the biggest rises are still to come as the port will begin expansion works in April which will lift capacity to 102MT by the last quarter of next year. In the same way, the Queeensland coal ports at Gladstone, Hay point and Dalrymple bay are all embarking on expansions to provide export coal capacity growth of a further 80MTpa over the next 2-3 years. The LT fundamentals are extremely good for this stock, and it is coming off an underpriced level due to the board embarking on a very conservative accounting policy which saw large non cash writedowns over the last 2 years. The writedowns have now been concluded and the board will be reporting substantial profits and cashflows with growth to come, with the interim results due out in late Feb.