A while back Foster's were suggesting a cashed up NHC could be...

A while back Foster's were suggesting a cashed up NHC could be on the acquisition trail and could look at WHC...

19-Sep-2012
Morning Report

New Hope Corporation Ltd - (NHC.ASX, $4.55/sh, Mkt Cap $3.5b) – NHC cashed up on the acquisition trail. - BUY Whitehaven Coal (WHC.ASX) PT $4.00/sh

Today’s Top Picks.

New Hope Corporation Ltd - (NHC.ASX, $4.55/sh, Mkt Cap $3.5b) – NHC cashed up on the acquisition trail. - BUY Whitehaven Coal (WHC.ASX)

•New Hope Corp (NHC.ASX) reported their full year results on Tuesday, resulting in profit before non-recurring items rising 16% to A$171.1 million, boosted by a 12% rise in annual production.

•The company substantially increased their cash balance in the previous year as a result of a $370m after tax gain from the sale of its interests in Arrow Energy, and now has a cash pile of $1.5 billion, and is on the lookout for acquisitions.

•We believe in this environment it is more prudent to buy existing production rather than build (capital expenditure) for the medium term. A continued fall in coal prices since the end of June has forced NHC and YAL to review growth plans.

•NHC’s Managing Director Mr Robert Neale said "New Hope continues to review the industry for further acquisition opportunities, which are becoming more prevalent in the current depressed market."

•We don’t discount the ability for NHC to pursue the likes of WHC given both stocks have underperformed the broader market over the last three months and NHC has sufficient cash available to buy Mr Tinkler’s ~21% interest and alleviate Mr Tinkler’s current financial woes.

•In terms of M&A activity, now is the time to be pursuing acquisition opportunities in the coal space with NHC -15% and WHC -42% respectively since March 2012.

•NHC had coal sales of 6.29Mt in 2012, of predominately thermal coal with EBITDA margins of 35% Vs WHC 6.14Mt and EBITDA margins of 33%. We expect with the bringing on of the Narrabri long wall, WHC’s profile will move to 10Mt in FY13.

•As a result we maintain a trading buy on WHC with a price target of $4.00/sh.



Link Provided: www.fostock.com.au/announcements/new-hope-corporat...