YAL (ASX) Ann: 1H 2024 Financial Results Presentation

Originally posted by eastwest101: ↑

Some interesting opinions about the 20% drop in share price with growth investors replacing yield/dividend investors.

Another way of looking at it simplistically is that the share price drop is the market thinking that YAL management are going to do something stupid with the pile of cash they are sitting on, and the most obvious definition of "something stupid" is overpaying for some or all of the Anglo American assets in M&A.

Even though there may seem to be a fair bit of competitive tension on the surface for these assets with the Indonesian GEAR vs Glencore vs YAL Chinese associated interests - and whether there are any other interested parties that could be ruled out (maybe WHC too busy digesting their recent acquisitions?)

I don't think any of these parties are interested in overpaying or FOMO-ing themselves into overpaying for these assets. The seller (Anglo American) is highly motivated (one of the assets is literally on fire!) so I expect that although there may be a lot of interest in these assets I think Anglo American will end up looking at very few very conditional lowball and even opportunistic offers and not companies FOMOing and falling over themselves overpaying for the assets. I think the buying interest will be disciplined, and will be tempered by the issue of increased coal royalties and how they can structure any offer to minimize stamp duty costs, minimize state-based royalties, what pricing mechanisms to use and what (if any) energy or end-user partnerships are available and where the final destination of this coal is - whether its China, India, Indonesia, Vietnam, Taiwan or South Korea or somewhere else. Unlike the recent sale process that WHC won - these assets are not Tier 1 assets but are long life and are permitted and producing so maybe more value to new owners than the current owners.

As other posters have said - with M&A there is sometimes the potential for value-destructive M&A although we are not at the manic levels of thermal and coking coal prices in the cycle,but certainly not the bottom of the cycle either.... whoever does their best "poker face" and presents a clean FIRB-proof unconditional offer will get the deal done and bidders kind of have to put themselves into the shoes of the sellers (the Anglo American board) and what their priorities could be, are they just self-sabotaging, and if not, what drives their exit plans? Certainly being cashed up gives YAL management the best chance and the most optionality of structuring a deal that is going to succeed.

Some of the articles above on the theme of "Get Big or get out" have also touched on the thematics of more difficult and longer timeframes to get new mines online that will favor the existing mines, plus the corporate synergies and maybe even some pricing power returning to the miners. As miners in other juristictions are finding out - coal mining is basically a capital-intensive logistics business, and all these handheld opportunistic 3rd world producers are one corrupt local official/coup/flood/labour strike/drought/famine/earthquakes/protest/derailment/shipping accident away from small but profitable marginal tonnes to zero tonnes in the blink of an eye. Customers in steel mills or powerplants don't want their production being held hostage by beer wars in Africa or floods in Indonesia - they want a stable reliable product at a known range of prices...

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If the board really did want the Anglo assets they have almost shot themselves in the foot through the last week.
They are going to need more capital than the cash and profits on hand and by not paying the dividend have almost shut the door on an equity raise now. Unless they plan to debt fund the entire assets surely they are now just hoping for an Anglo break up and a small acquisition.

No.	Vol.	Price($)
1	692	$5.87

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692

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1	692	5.870
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692

5.870

4983

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5.850

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Price($)	Vol.	No.
5.890	1459	1
5.900	5500	1
5.910	112217	6
5.920	28146	4
5.930	18701	2

Price($)

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5.890

1459

5.900

5500

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18701

(20min delay)
Last $5.88		Change 0.080(1.38%)		Mkt cap ! $7.764B

Open	High	Low	Value	Volume
$5.79	$5.91	$5.73	$15.07M	2.575M

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