Stocks’ Details

Tribune Resources Limited

Cash Position at the End of Sep Qtr Reported at $62.4 Mn: Tribune Resources Limited (ASX: TBR) is primarily engaged in the exploration, development, and production activities at the Group’s East Kundana Joint Venture tenements.
 
The company in its September’19 quarterly report highlighted that 30,454 tonnes of EKJV ore and 0 tonnes of R&T ore were processed at the Greenfields Mill, and 236,766 tonnes of EKJV ore was processed at the Kanowna Plant. Net operating cash inflow for the period was reported at $2,427,000. Net cash inflow from investing activities for the period was reported at $1,898,000. Net cash outflow from the financing activities for the period was reported at $1,079,000. Cash and cash equivalents at the end of the period were reported at $62,405,000.
 

September’19 Quarter Operating Cash Flow Statement (Source: Company Reports)

What to Expect: The Group intends to continue its exploration, development, and production activities on its existing projects and to acquire further suitable projects for exploration as and when opportunities arise.
Stock Recommendation: The stock generated a positive YTD return of 47.42%. Its gross margin, EBITDA margin, and net margin for FY19 stood at 54.9%, 43.4%, and 19.8%, better than the industry median of 38.9%, 28.7%, and 10.9%, respectively, implying decent fundamentals for the company. Its ROE for FY19 stood at 16.6%, better than the industry median of 12.0%, which implies that the company generated a better return for its shareholders than its peer group. Its current ratio for FY19 stood at 3.43x, higher than then industry median of 1.81x, implying a decent liquidity position for the company. Its debt to equity ratio for FY19 stood at 0.03x, lower than the industry median of 0.13x. Considering the company’s September quarter results, decent cash position and current trading levels, we recommend a “Buy” rating on the stock at the current market price of $6.150, up 4.237% on December 17, 2019.
 

Coronado Global Resources Inc.

Net Income at the end of Sep Qtr Improved by ~53% on Prior Qtr: Coronado Global Resources Inc. (ASX: CRN) is involved in the development and operation of premium quality metallurgical coal mines in Queensland, Australia (Curragh) and the states of Pennsylvania, Virginia and West Virginia (Buchanan, Logan, Greenbrier) in the United States of America.

September’19 Quarter Key Highlights: Third-quarter revenue (unaudited) was reported at ~$536 Mn, whereas Year-to-Date revenue (unaudited) was reported at ~$1,770 Mn. Year-to-Date mining cost per tonne sold (unaudited) was reported at $52.2 per tonne. Net debt as on September 30, 2019, was reported at $276 Mn, following the payment of the interim distribution of $0.41 per CDI. The group successfully extended the maturity of the Syndicated Facility Agreement (SFA) to February 2023 and increased the facility amount from $350 Mn to $550 Mn.


September’19 Quarter and YTD Income Statement (Source: Company Reports)

What to expect: Industrial growth in Europe and Brazil has stalled, and Mill Utilization rates have continued to drop. As a result, mine inventories have grown, which has led to an increase in inventory management costs and curtailment in production. FY19 Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) is now expected to fall below the lower end of the prior guidance range of $687 to $737 Mn.

Valuation Methodology:PE Multiple Approach

Price to Earnings (PE) Multiple Approach (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, *NTM-Next Twelve Months

Stock Recommendation: The stock price fell by 23.53% in the past six months and posted a negative YTD return of 9.08%. The stock is trading close to its 52-week low level of $1.900, proffering an opportunity for share accumulation. There are robust long-term demand fundamentals for high-quality metallurgical coal; therefore, the company has kept its production growth expansion plans unchanged. Its balance sheet capacity and low-cost operating structure have positioned CRN to withstand these weaker market conditions and grab growth opportunities in relevant markets. Considering September’19 quarter results, metallurgical coal outlook, and current trading level, we have valued the company using a relative valuation method i.e., PE multiple, and arrived at a double-digit growth (in %). Hence, we recommend a “Buy” rating on the stock at the current market price of $2.140, up 0.469% on December 17, 2019.
 

Whitehaven Coal Limited

WHC Revises FY20 Guidance: Whitehaven Coal Limited (ASX: WHC) is engaged in the business of development and operation of coal mines in New South Wales. Recently, Lazard Asset Management Pacific Co increased its stake from 9.94% to 10.95% in the company, effective from December 6, 2019.

On December 5, 2019, the company provided an update on its FY20 guidance, where it highlighted that earlier its FY20 managed ROM coal production guidance was in the range of 22.0 to 23.5 Mn tonnes with managed coal sales guidance of 20.0 to 21.0 Mn tonnes.

 The unit cost guidance (excluding royalties) stood at $70 per tonne. However, due to the challenges pertaining to sourcing skilled operators for Maules Creek and impacts from dust events related to severe and ongoing drought conditions in North West NSW, the company has issued updated FY20 guidance.

 

FY20 Guidance (Source: Company Reports)

September’19 Quarter Key highlights: The managed saleable coal production rose by 23% on PCP, to 4,909k tonnes, and the company’s managed total coal sales stood at 5,546k tonnes during the quarter, up by 14% against the previous corresponding quarter. Total equity coal sales for the quarter stood at 4.5 million tonnes, with equity own coal sales of 3.9 Mn tonnes, which remained in line with the previous quarter.
 
Valuation Methodology:EV/Sales Multiple Approach

EV/Sales Multiple Based Valuation (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, *NTM-Next Twelve Months

Stock Recommendation: WHC’s share generated a negative YTD return of 31.52%. The stock has declined towards its 52-week low of $2.585. Its gross margin, EBITDA margin, and net margin for FY19 stood at 54.6%, 59.1% and 21.2%, better than the industry median of 44.3%, 32.2%, and 15.3%, respectively, implying decent fundamentals of the company. ROE for FY19 stood at 15.1%, better than the industry median of 13.2%. The debt to equity ratio for FY19 stood at 0.12x, lower than the industry median of 0.24x. Hence, considering the company’s September Quarter production data, updated FY20 production guidance, and current trading levels, we have valued the stock using a relative valuation method, i.e., EV/Sales multiple approach and arrived at a lower double-digit growth (in % terms). Hence, we recommend a “Buy” rating on the stock at the current market price of $2.650, down 3.285% on December 17, 2019. 
 
 
Comparative Price Chart (Source: Thomson Reuters)

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