Whats changed? They valued PRC at $1.20 NZ conservatively. Since then the price of coal had INCREASED.
From the Forsyth Barr report, dated 7 July 2007:
Recommendation: ACCUMULATE Risk Factor: High Stock Price: $1.00 Valuation: $1.20 Financial Summary NZX Code: PRC Issued Shares: 180m Market Cap (at issue price): $180.0m Ave Daily Turnover: n/a NTA: $0.75 (07F) 12 Month Low - High: n/a Year to 31 December 06A 07F 08F 09F Reported Profi t ($m) 0.1 -1.5 -6.6 58.9 Normalised Profi t ($m) 0.1 -1.5 -6.6 48.8 Normalised EPS 0.1c -0.7c -3.1c 22.9c Normalised EPS Growth nm nm nm nm Normalised P/E nm nm nm 4.4x P/E Relative nm nm nm 30% EV/EBITA nm nm nm 2.9x EV/EBITDA nm nm nm 2.5x Interest Cover 0.7x -0.8x -1.0x 18.2x DPS 0.0c 0.0c 0.0c 10.0c % Imputation 100% Gross Div Yield 14.9% Net Div Yield 10.0% ROE 0.2% -1.1% -4.8% 23.8% Monday, 9 July 2007 INITIATION OF COVERAGE
Key Points �� Pike River is developing an underground coal mine near Greymouth which will produce 1m tonnes p.a. of premium hard coking coal with qualities which will make it very desirable for use in steel furnaces. �� Global steel demand is strong, driven by Chinese and Indian production growth; prices for coking coal have risen dramatically since 2004 and are expected to remain well above average levels seen over the last thirty years. �� However the mine will not be in full production until 2009 and a number of development risks remain, and our $1.20 valuation is very sensitive to coking coal price and exchange rate assumptions. Our Analysis • Our DCF base case valuation is $1.20 per share, assuming premium hard coking coal prices decline from current levels of around US$100/tonne to around US$85/t by 2012, and that the NZD falls to US60c by 2009. However we note the following uncertainties: i It is still 9 months to fi rst coal and actual operating costs will not be known for some time after that. Industry consultant BDA has confi rmed PRC’s cost estimates are reasonable but have some potential to increase. The project has seen delays and increased development costs as conditions have proved more diffi cult than anticipated; ii High-pressure hydro extraction will not begin until 2009. Underground conditions actually experienced could impact the cost, quantity or quality of hydro-extracted coal. iii Our valuation is very sensitive to coking coal price assumptions – PRC’s sales contracts are for volume only, with price set annually against Queensland coking coal prices. Valuation is also very sensitive to the NZDUSD exchange rate; and iv Nearly half of PRC’s planned production is from inferred reserves or requires consents contingent on low environmental impact (although the assumptions have been assessed as reasonable). There may be reserve upside from PRC’s current permits and the deeper Paparoa seam, and upside from savings in transport costs.
Investment View Our $1.20 base case valuation assumes a long-run premium hard coking coal price of US$85/tonne, in line with approximate consensus, but forecasts range from around US$60/tonne to US$110/tonne. We also assume a long-run NZDUSD exchange rate of 60c. Upside from additional reserves and transport cost savings could add around 30c to our valuation. While we believe a premium on listing is likely, subsequent volatility may offer more favourable entry opportunities.
Now the McDouall Stuart report, not sure of date:
Comparative Company Multiples Table 4 presents EV/EBITDA multiples for a selection of listed comparables. Both peer group companies, Gloucester Coal Limited (“GCL”) and Resource Pacific Holdings Limited (“RSP”) are ASX listed. Table 4: Comparative Company Earnings Multiples Comparative Multiples GCL RSP Market Cap (10-May-07) $383.3M $360.7M Capitalisation Rate 15.0% 15.0% MV Equity (30-Jun-08) ("P") $450.0M $423.4M MV Debt $24.6M $115.3M Enterprise Value ("EV") $474.6M $538.7M EBITDA (y/e 30-Jun-09) $66.3M $99.5M EV/EBITDA 7.2 5.4 Earnings (y/e 30-Jun-09) ("E") $41.2M $55.8M P/E 10.9 7.6 Sources: IRESS; consensus analyst forecasts; McDouall Stuart estimates.
PRC Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
