New Hope Corporation Limited

A Look at Recent Update: New Hope Corporation Limited (ASX: NHC) had recently issued a release stating that it was advised by Department of Environment and Science that, after the provision of Coordinator General’s change report on February 12, 2019 approving amendments to noise limit conditions recommended by Land Court, the preconditions to Land Court’s recommendation to approve application to amend Environmental Authority for New Acland Stage 3 project have been satisfied. 

Quarterly Information (Source: Company Reports)

Also, as a further result of change report of Coordinator General, preconditions with respect to Land Court’s recommendation to approve Mining Leases for New Acland Stage 3 project have been satisfied.Recently, the company also released its report for the quarter ended January 2019 where it reported an increase in its total saleable coal production by 28.2% to 2,657,000 tonnes (PCP: 2,073,000 tonnes), and total coal sold increased by 5.7% to 2,401,000 tonnes (PCP: 2,272,000 tonnes). The company would be releasing the half-year financial report on March 19, 2019.

Decent Standing from Margins’ Perspective: The company happens to be in decent footing when it comes to its key margins. In FY 2018, the company’s net margins stood at 13.9% which is higher than the industry median of 13.2% which highlights the company’s capability to convert its top line into the bottom line.  Also, the company’s net margins have improved in the five-year period to FY 2018 (i.e. FY 2014- FY 2018). In FY 2014, the company’s net margin was 10.6%. However, the company’s EBITDA margin stood at 39.7% in FY 2018 which is the higher than the industry median of 31.9%.

Stock Recommendation and Outlook: As demonstrated in New Hope’s financial results release for the year ended July 31, 2018, the company is well positioned when it comes to meeting growing energy demands of its Asian customers. Also, the company might be supported by its decent standing from the liquidity point of view as its current ratio, in FY 2018, stood at 2.78x which is higher than the industry median of 1.16x.

As per Australian Securities Exchange or ASX, the company’s stock is trading towards its higher level. Therefore, it can be assumed that the positive factors have been discounted in the company’s stock price. On the backdrop of the above-mentioned factors, it can be said that the stock of NHC is expensive at the current market price of A$4.110 per share, while it is inching closer to the 52-week high price.
 

Whitehaven Coal Limited

WHC performance in H1 FY19:  Whitehaven Coal Limited (ASX: WHC), which has a market capitalisation of $ 4.61bn  declared its first-half result result and the same was announced at ASX on 15th February 2019 in which the company marked a net profit after tax of $305.8 million for the first half of FY2019 up 19% as compared to pcp. However, unit cost per tonne increased to $69/t from $57/t. The outcome of higher coal prices and higher production, when compared to H1 FY2018, reflected on the revenue, and the company reported revenue of A$1,270.1 million up by approx. 10.8% form H1 FY 2018. The underlying EBITDA for the company was A$550.8 million as compared to A$493.7 million.
 

 
1H FY 2019 Highlights (Source: Company Reports) 
 
A Quick Understanding of WHC’s Key Margins: WHC is in the strong position when it comes to margins. The company’s net margin stood at 24.1% at the end of December 2018 which is higher than the industry median of 13.6% reflecting the company’s capability to turn its top line into the bottom line. The company’s EBITDA margin stood at 43.4% at the end of December 2018 while the industry median stood at 33.9%.
 
What to Expect From WHC: Whitehaven Coal Limited would be targeting returning surplus capital to the shareholders in 2H FY 2019 as well as it plans to maintain its existing robust balance sheet. Also, in 2H FY 2019, the company plans to ensure that the costs remain tightly controlled. Whitehaven Coal would continue to improve the safety performance.
 
Stock Recommendation: Talking about past performance, the stock of Whitehaven Coal had posted the return of -9.17% in the span of previous 6 months while, in the previous one month, the stock had delivered the return of -5.80%. However, as per Australian Securities Exchange, the annual dividend yield of Whitehaven Coal stood at 6.46%.
 
Considering the performance of the stock for the time period of 6 months and 1 month and some bit of volatility, we advise the market players to consider avoiding the stock at the current market price of A$4.480 per share.
 

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