Ann: June 2024 Quarterly Report, page-89

This is a big claim to make. And what is 60% overvalued - the equity or the EV? Cos it is the equity you’re buying…

YAL the past quarter realised a price of A$181/t and we know their costs are around A$96/t.. so call EBITDA margins A$85/t, allow some deductions for capex, corporate and tax and perhaps A$50/t FCF on 35mtpa equity sales is A$1.75bn or A$1.33/sh.

WHC thermal Ops realised A$207/t - which is +A$26/t on YAL but we know costs are around A$16/t more expensive here (at the moment but let’s assume it stays that way). So A$95/t margins, make the same allowances for capex, corp, taxes and A$60/t FCF on 13mtpa equity sales is $800m or A$1/sh.

WHC Met Ops is a bit unknown - we know they’re realising almost A$70/t higher prices than thermal (A$271/t) but costs are likely in the order of A$40-A$50/t more expensive. So add net $25/t margins to the thermal margins and you’re at A$110/t margins, perhaps A$75/t FCF on 15mtpa equity sales (A$1.40/sh).

So here you have WHC making A$2.40/sh on the above math and YAL A$1.33/sh.. almost double the earnings (cash flow) per share but YAL is trading at ~$7/sh and WHC ~$8/sh.

What I’ve obviously missed here is the cash/debt positions along with deferred and contingent payments over the short term. But that all gets resolved out of near term earnings.

My point being here that WHC has nearly double the EPS in a couple years time to YAL (on my figures above, happy to hear why they’re wrong) and it’s EPS as SHAREHOLDERS that should matter. Yes there is a deleveraging process that needs to occur here before the earnings per share make their way into shareholders pockets (via dividends per share) but that’s just a timing thing.

What would you rather - A$1.33/sh out for foreseeable future or zero for the next 2years and then A$2.40/sh for the foreseeable future (plus first on costs you A$7 and second A$8).