nope, not really missing anything, the share price should be 2x...

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investor_jackson

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08/04/22

15:02

Post #: 60744194
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Originally posted by puppyeh: ↑

can someone please explain to me why this stock trades where it does. it has massively lagged the rally in larger coal names (WHC, NHC, CRN) as well as dodgy levered things like TER. This is a wildly misunderstood business. the domestic business is much more 'utility like' than a typical thermal business, you can see that in the PnL which didn't change much during COVID despite seaborne thermal prices getting obliterated. the domestic biz pumps out a reliable 35mm EBITDA (average), year in, year out, and with ample reserves should be valued much higher than a typical seaborne coal business. say 4-5x EV/EBITDA?

meanwhile at current spot or even much less, the proportionate EBITDA from the coking coal biz is somewhere around $130-200mm (in AUD, proportionate basis, ref $350/t-$450/t benchmark met prices). meanwhile the EV for the entire entity today is just $190mm. so you pay maybe 1x EV/EBITDA for the export business, and get the entire domestic business, AND all the optionality on Crown Mountain, for free.

people will say lawsuit risk but frankly with coal prices where they are there is no issue with the lawsuit. let them lose it and pay it, if it removes the overhang surely this rerates? I get to a $1.75 stock target and I'm only giving 1H'22 credit (ie, what is already in the bank basically) for super normal export earnings. realistically they could earn half their market cap in cash in the next six months, again, with zero debt...

i feel like im missing something fundamental. please correct me if so.

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nope, not really missing anything, the share price should be 2x what it is today and there would arguably still be more room to move upwards... so yes, it is wildly undervalued and unloved currently!

A few things that come to mind as to why Mr Market is valuing BRL at this stupidly cheap price (things that aren't necessarily directly related to the company fundamentals/operations but may be seen to be impacting it):
- there is a court case that could cost $50m or so, but given they lost the previous one against BRL, the chance of this subsequent proceeding being successful is virtually 0 in my mind (perhaps Mr Market thinks different)
- the stock is quite tightly held
- BRL haven't paid much of a dividend over the years so Mr Market probably doesn't 'believe' in it like they do for other coal companies (as other coal companies have declared very large dividends at times)
- the current government in NZ is extremely 'anti coal' (or is seen to be that way) and despite this having little actual impact on the company's financials, the overriding regulatory environment is still likely seen by Mr Market as 'highly negative'

Fingers cross FY results contain a large dividend which will help put BRL back in the minds of Mr Market!

BRL Price at posting: $1.03 Sentiment: Buy Disclosure: Held
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6 Great analysis

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