Coronado Global Resources Inc.
CRN Details
This report is the updated version of the report released on 3 June 2022 at 3:55PM GMT.
Conversion Rate Update: Coronado Global Resources Inc. (ASX: CRN) is a producer and exporter of metallurgical coal. Further to the recent declaration of unfranked special dividends of ~US$0.1193 per CDI to Australian CDI holders, CRN reports the forex conversion rate (AUD/USD) of ~0.7187 and a total special dividend of ~A$0.16602 for relevant CDI holders in Australia (based on the rates given by Federal Reserve Bank of Australia on 31 May 2022 (the record date)).
Latest Presentation Highlights & Q1FY22 (ended 31 March 2022):
- The demand outlook for steel is expected to be robust as forecasted by India’s total crude steel production growth (~246% to 403Mt by 2050 Vs. ~123.8 Mt in 2022). India is the largest export client of CRN and accounts for ~26% of the company’s seaborne metallurgical coal sales.
- CRN exited Q1FY22 with ~US$571 million cash balance and held a net cash position of ~US$257 million as of 31 March 2022. Both S&P and Moody’s released improved corporate credit ratings for CRN in Q1FY22.
Growth in Revenue Y-o-Y and Q-o-Q; (Analysis by Kalkine Group)
Key Risks: The company faces the risk of forex rate changes, met coal price & demand fluctuations, inflationary pressures, and increased expenditure due to mine improvement projects.
Outlook:
- CRN targets to boost the production profile year-on-year at the Curragh mine operations in Australia to achieve ~13.5 Mt in FY25 (Vs. ~11.1 Mt recorded in FY21).
- The company focuses on driving operational efficiencies and reducing costs despite inflationary risk globally. It plans to reduce its debt further and distribute cash prudently.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of CRN gave a negative return of ~2.60% in the past month. The stock has a 52-week low level of $0.740 and high level of $2.490. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers, considering the risk of expanding production at the projects, higher investments, and the continuing COVID-19 disruptions. For this purpose of valuation, a few peers like Sims Ltd (ASX: SGM), Mount Gibson Iron Ltd (ASX: MGX), Stanmore Resources Ltd (ASX: SMR) have been considered. Considering the current trading levels, rise in ROM production from Australian & US operations, Curragh mine improvement plan underway, robust demand and pricing outlook for met coal, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $2.100, as of 3 June 2022, 10:35 AM (GMT+10), Sydney, Eastern Australia. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
CRN Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.
Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.
There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.
You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.
The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.
Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.
Please also read our Terms & Conditions and Financial Services Guide for further information.
On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.
Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.