Granted there's definitely inflationary pressures on the cost side, and government intervention is a significant concern.
Using cash at 31 Jan of $1bn we have a current enterprise value of around $3.5bn. Coal prices have significantly reduced, however there's likely to be a little tailwind from the lag effect in some of their contracts in this quarter/half.
We're also good at this stage that nhc has not been hit with the onerous royalty increases in Qld.
Production is about to increase.
Last half year our npat was around $700m and free cash flow was over $900m. Clearly that will come down with coal prices, however even at current coal prices once we have increased production future full year profits it's not unreasonable to forecast $500m - $1bn p.a., with FCF higher after adding back depreciation. Shares on issue are decreasing as well so my share of those future profits is increasing.
There are risks of course but I'm reasonably comfortable staying invested at this point.
NHC Price at posting:
$5.17 Sentiment: Buy Disclosure: Held
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