Gaurav Sodhi in Intel_ligent Investor today: (last part of article)
..."Net profit and earnings per share fell by more than half, but this reflects unsustainably high prices last year. The business still generated $560m in operating cash flow, margins of almost $90 a tonne and dividends of 39cps for the full year. With production primed to grow, those numbers have every shot of improving.
New Hope carries almost $500m in net cash and made a bid for Anglo's coal assets. There aren't many miners with a decades long history of buying and selling assets as well as New Hope.
Coming from another miner, a large acquisition would be something to fret, but from this business, we have no such fears.
Over the last three years alone, New Hope has paid $1.5bn - more than 40% of its current market capitalisation - in dividends. Sensible capital allocation, the most elusive thing to find in mining, is a given here.
At the current price, New Hope still appears attractive. Received coal prices of $195 last year are lower than the current spot price, and output is still climbing, so the outlook for profits and dividends is good. The business yields over 8% and trades on a price-to-earnings ratio of just 8 times, but this is a significant premium to peers.
Best-in-class management and production growth justify the price, but New Acland faces yet another court hearing early next year. Legal challenges have slowed mining despite approval going through a 12-year vetting process. Legal risks are hard to quantify and remain a source of risk."
NHC Price at posting:
$4.74 Sentiment: Buy Disclosure: Held
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