Target $18.72, page-7761

I don't really like throwing price targets around but I think the way to view it is bigger picture:

1. Attractive starting valuation - coal sector is one of the most discounted sectors on the market despite being highly profitable & demand growing globally.
2. How much cash flow will these long life assets generate over 3yrs? 5yrs? 10yrs? 20yrs? There will be windfall periods and likely even negative periods across these timeframes due to natural cyclicality of commodities. What is the accumulated free cash flow potential when compared against current enterprise value & when compared against acquisition price?
3. Capital management - hopefully management de-lever the debt as quickly as possible and hook back into BuyBacks if no material re-rate has occurred. If it has occurred, pay a steady dividend with 50% of NPAT & let the other 50% stack as cash for optionality (might include special divs, buybacks, or more acquisitions).
4. Index ownership - WHC is doubling in size and with that should come passive fund flow to meet index weightings (likely already started as we close in on the deal deadline). Then, as a potential tailwind, the ASX has been pretty dead flat for 10-15yrs. If this breakout, index funds will need to increase their exposure to WHC to maintain weightings.
5. I'm sure I've missed some factors!

I did a tweet early on in the coal cycle back at $2 WHC and used 2016 FMG as an analogy - dirty sector (iron ore / mining), big debt, no dividends etc. Look where FMG is today 7yrs later... Then add in the franked dividends over this period for TSR. And this is with aggressive pullbacks and rough quarters along the way. So, where could WHC be in 5 years time? Who knows!

Obviously, underlying coal prices are the single biggest factor on cash flows, followed by operating costs.