adani, linc and india - linc valuation

What I’m writing is nothing new, but it simply summarises my personal views as to why Linc provides a cheap, low risk local thematic growth exposure to India’s growing middle class and energy needs… and why the royalty stream from Adani is a low risk asset that should be brought back into the lime light with it being worth more than LNC’s market cap.

Have a read of the current dire situation reported by the wall street journal, where Indian power stations are hampered by the lack of coal:

http://online.wsj.com/article/SB10001424052702304331204577352232515290226.html

In summary due to bureaucratic inertia and uncertainty (More onerous that QLD, shock) India’s coal exploration, let alone mining, are at infant stages and will be for a long time (It also quantifies 1.5 million new vehicles being added to Indian road each month).

Whilst there are a multitude of Middle Class growth story exposures across BRIC land, LNC’s royalty stream as a project of national importance to India, is being progressed ASAP by Adani (Half a Trillion dollar plus conglomerate) comprising of:
- Adani Enterprises: $250B~
- Adani Ports: $235B~
- Adani Power: $110B~

It has has been hampered by heavy QLD rains which the State suffered, but their motivation is easily seen through:
- $1.8 billion spent buying the current Abbot Port, which can handle 50MT per annum
- Has work quietly to progress singular rail work access to a feasibility stage with QR for independent rail access to Abbott, with Palmer’s laywer of 20 years ironing out legalities (has escaped the squabble between Hancock and Rinehart)
- Has bought out a significant Cattle ranch land parcel for a princely premium
- Other than the above making the press it has quietly been managing purchases of landowners, without troubling the government for compulsory land acquisition
- Commitment to local labour use and training if required of approximately 5000 Australian workers, it’s doing whatever it can to be a good corporate citizen
- Primary focus in Australia, nothing else until this is brought online

The Carmichael Mine is going to happen, and whilst Adani would like to fast track developments, it’s now in the hands of the QLD government to decide how long it will take to review the EIS and progress to the next stage. Given the QLD government is tens of billions in debt, it needs the royalty sooner than later. Adani has pledged to work through whatever environmental issues raised by the Government.

With Adani’s singular mission in galilee basin, being a cohesive, experienced and well financed port, rail and mine team it will help unlock the ‘final frontier’ of QLD Coal and continue India’s middle class story.

On an aside, it is of interest to read Linc's $1.50 12 month Target/$3 DCF Valuation by Austock, where updates on Teresa's and Adani's progress can be read in more detail

http://www.lincenergy.com/php/ic-dlAnalystsReport.php?id=25