Whats changed? They valued PRC at $1.20 NZ conservatively. Since...

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.