Target $18.72, page-7920

AFR 23.1.2.23 Tom Richardson said

"Whitehaven Coal said this year’s $US3.2 billion ($4.8 billion) acquisitionof BHP’s Daunia and Blackwater metallurgical coal mines would be 70 per cent (my emphasis) earnings per share accretive in financial 2024 and increase its total coal resources 75 per cent to 4.6 billion tonnes, although it will be forced to cut short-term dividends to finance the deal.

“It’s a really good acquisition,” said Robert Gregory, founder of Glenmore Asset Management. “It wasn’t the bargain price thatStanmore Resources got when they bought Poitrel and South Walker Creek off BHP, but it was still a decent price.

“If you’ve got a medium-term time horizon the reward for Whitehaven investors should be a significant step-up in earnings power and dividends.

“For coal the big attraction is the lack of supply coming on-stream as it’s so hard to get permitting and financing for new mines.”

The broker said Whitehaven shares were worth $10 each, some 38.5 per cent higher than Tuesday’s market price of $7.22. On Morningstar’s forecasts, the coal company also offers an estimated yield of 4.7 per cent plus the tax benefits of full franking credits.

The forecast dividend payout of 34c (my emphasis) per share in financial year 2024 is significantly down on the 74¢ per share in the year ended last June 30, and reflects Whitehaven’s need to finance its transformational acquisition, alongside thermal coal prices that tumbled from boom time levels of $US400 a tonne at the end of 2022 to $144 a tonne on Tuesday.

Bargain hunting

“We like Whitehaven, you’ve got strong demand for its thermal coal and on the supply side, longer term, all the big miners are trying to get rid of met coal assets or not expand supply,” said Morningstar’s analyst Jon Mills...

“No matter what they say at COP28, the world’s on track to burn more coal this year, than last year,” said Mr Mills. “Metallurgical coal is driven by steel production in China and India, so you have strong demand and longer-term supply constraints.”...

For income seekers in 2024, Morningstar rates the $4.3 billion thermal coal miner New Hope Corporation, ahead of Whitehaven.

Morningstar thinks New Hope will pay dividends of 27¢ per share in financial 2024, before that rises to 38¢ per share in financial 2025. This places the Bengalla producer on an estimated fully franked dividend yield of 5.3 per cent in financial 2024".

(Apolgies for formatting problems.
To open link fully, google "AFR Richardson investors tip strong payouts from sin binned coal stocks")