In today’s daily we have covered stock research on Whitehaven Coal (BUY).









 
The S&P 500 was up by 5.80 points or 0.28%on Thursday to 2072.83 points. U.S. stocks rose on Wednesdayboosted by tech shares, with the S&P 500 and Dow industrials closing at records, while the energy sector was once more the largest weight on the market as crude prices continued to flirt with multi-year lows. West Texas Intermediate crude tumbled 6.3 percent to $69.05 a barrel at 1:24 p.m. New York time, and Brent fell below $72 a barrel for the first time since 2010. 

Speculation that the ECB could soon embark on a programme of “full-blown” quantitative easing has intensified in recent weeks, largely on the back of comments from its president, Mario Draghi, and vice-president, Vitor Constâncio. Chinese stocks remained buoyed with optimism that further interest rate cuts could be on the cards and the Shanghai Composite rose 1 per cent to a fresh three-year high – taking its year-to-date gain to 24 per cent.



Brent Crude Futures Daily Chart (Source – Thomson Reuters)
S&P ASX 200was up by 4.7 points or 0.09%on Thursday and closed at 5400.9 points.Commonwealth Bank lifted 0.6 per cent to $81.50, while Westpac rose 0.5 per cent to $33.23. National Australia Bank jumped 1.5 per cent to $32.93 and ANZ inched 0.2 per cent higher to $32.45. Telstra shares rose 1.2 per cent to $5.74. Rio Tinto slipped 0.6 per cent to $58.02, BC Iron shed 4.6 per cent to 56¢ and Atlas Iron lost 2.6 per cent to 19¢. Fortescue Metals was the exception, rising 2.5 per cent to $2.86.
The Australian dollar is trading at US85.47¢, compared with US85.84¢ at Thursday’s local close. Earlier in the overnight session, it peaked at US86.15¢. SPI futures are down 17 points at 5397. Iron ore rose to $US69.98. The following stock will trade ex-dividend today: GrainCorp. Among energy shares, Santos dropped 3.1 per cent to $11.61, Origin Energy fell 3.2 per cent to $13.17 and Oil Search lost 2.6 per cent to $8.47.
 

Santos Daily Chart (Source – Thomson Reuters)
 
Top Performers on the ASX 200 were :-


 
Stock of the Day - Whitehaven Coal (BUY)

In view of the updates provided during the AGM in October 2014, Whitehaven Coal (WHC) enlightened us by virtue of significant progress made in transforming the Company into one of Australia’s largest independent coal producers. This has been well supported by the development of WHC’s Maules Creek open-cut mine near Gunnedah, which is the largest mine of its type being identified anywhere in Australia.


Financial Highlights for FY2014 (Source – Company Reports)

Although WHC’s financial performance was affected by harsh market conditions, the operational achievements helped WHC to lessen the turbulence. WHC reported a 25% increase in production to 10.3 million tonnes (100% basis) translated to a 21.4% increase in revenue to $755.4m in FY2014 even during a period which has been soft in coal pricing and is driven by an unfavorable currency.

The net loss after tax decreased to $38.4m from $88.7m of the previous year. WHC did not declare any dividend in FY2014 as per its dividend policy. WHC’s funding position is robust and the net debt as at 30 June is $685.2m with gearing at 18%.

As part of the outlook, WHC believes that with Maules Creek only months away from railing first coal, the Company is expected to be one of Australia’s largest and lowest-cost producers of superior coal. The global demand for coal in absolute tonnage terms is also rising which is a good sign for WHC. 


Coal and its Role in Global Energy (Source – Company Reports)

The pre-approvals at Vickery to expand to an additional 5Mtpa if required, are also in place and facilitate WHC to witness growth. This project provides growth option for WHC beyond FY2018.

With regards to Maules Creek, WHC has the reserves to support the mine for 30 years and has planned for 13 Mtpa ROM. Narrabri North is permitted for 8 Mtpa ROM and planned for 6 Mtpa ROM. Tarrawonga is permitted for 3 Mtpa ROM and planned for 2 Mtpa ROM. Similarly, the Company has planned for Rocglen, Vickery, Gunnedah CHPP and Werris Creek Mine. Other key efforts include overcoming quality issues in Narrabri thermal coal, completion of Werris Creek Mine expansion, resolution of legal challenges to Maules Creek project, progressive construction of Maules Creek project (75% complete), and opening of a representative office in Tokyo for Maules Creek Marketing.


Maules Creek –Mine Infrastructure (Source – Company Reports)

At Narrabri, record ROM and saleable coal production of 5.7Mt and 5.2Mt, respectively, have been reported for FY2014. The mine has been positioned as one of the most productive mines in Australia. Production in FY2015 is forecast to exceed earlier guidance of 6.5Mt ROM coal.



Narrabri Saleable Coal Production (Source – Company Reports)

It is encouraging to note that revenue will begin for coal sales from January 2015 in view of 75% completion for Maules Creek. Commissioning of the remaining mine infrastructure will continue during 2015. First coal is expected to rail from Maules Creek project in January 2015 (as per WHC’s announcement of 23 October 2014), ahead of the original schedule and within budget.

Production is expected to more than double by FY2018 as Maules Creek ramps up. Further, saleable production in FY2015 is expected to be about 14Mt on a 100% basis.

WHC’s managed production has increased by 26% to 10.3Mt for the year owing to the excellent performance at Narrabri. The open cut mines also performed well as Werris Creek and Tarrawonga set new records. The Company thus expects to have increased production in FY2015.


Saleable Coal Production by Mine (Source – Company Reports)

WHC also reported for coal sale into premium Asian markets. Japan and Korea have been identified as key markets. Thermal coal sales in FY2014 were 8.9Mt (100% basis) including purchased coal with most sold into the premium Asian markets. Metallurgical coal sales totaled 2.0Mt (100% basis) in FY2014 with PCI and SSCC coal sourced from Narrabri, Tarrawonga and Werris Creek.


Thermal Coal Sales 2014 (Source – Company Reports)

The September 2014 quarterly updates witnessed ROM coal production of 3.5Mt which was 30% higher than the previous corresponding quarter. New saleable coal production record of 3.3Mt was also 40% higher than the previous quarter. These all served as good indicators of WHC’s ongoing performance. The Company spent a total of $0.175 million on exploration during the September quarter.


Whitehaven Equity Production and Sales Highlights (Source – Company Reports)


WHC Daily Chart (Source - Thomson Reuters)

Given the entire game-plan, we put a BUY recommendation for this stock at the current price of $1.30.

 
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