I wouldn’t be opposed to SMR taking out another listed coking coal producer in a script for script deal. As I mentioned previously given SMR’s size and assets as well as management’s growth aspirations SMR was always going to acquire another company to upgrade its portfolio rather than be taken out itself by another coal producer.
Issue with buying any privately-held asset or an asset level deal from another listed entity is that private markets are telling you that long-life coking coal assets are worth circa 4-6x EV/EBITDA whereas public markets are only valuing comparable assets at 2-3x. Thats why a script for script deal makes sense as if both of your shares are fundamentally undervalued by the market then script for script works for both parties.
Having said that the only listed producer that makes sense for SMR to buy is Bathurst Resources (BRL), which you can argue is even more undervalued by the market than SMR. A script for script offer at $0.15 makes obvious sense to both companies and I’m sure BRL shareholders would be running to swap their management team for Dan Clifford and Co. That deal would solve two things- massive dilution to Golden plus I could see the combined multi-asset $250m EBITDA entity rerating to a market cap of $1bn within 12 months of close. This is the most obvious win/win merger in the sector.
All my my own research and opinion. I hold both SMR and BRL. Do your own research.
SMR Price at posting:
$1.08 Sentiment: Buy Disclosure: Held
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