Share Price: $4.00
Shares: 212m
Market cap: $850m
EPS estimates
30-6-09: 150c, P/E 2.7 (Low 107c, High 174c)
30-6-10: 200c, P/E 2 (Low 177c, High 377c)
DPS estimates
30-6-09: 75c, Yield 18.8%
30-6-10: 100c, Yield 25%
Summary
Positive
* Global market leader in supply of seaborne low volatile PCI coal.
* Low cost PCI (steel) coal producer. UBS estimates cost per tonne is $94, MCC says FOB costs are $75 in FY2008 annual report.
http://ar.macarthurcoal.com.au/2008/index.cfm?contentID=13
* Still ramping up post early 2008 floods.
* Strong coal sales
* On steady state profits, very cheap and massive dividend yield.
Negative
* Hard to judge growth profile.
* Negative cash from operations in FY 2008.
* What impact to foreign exchange contracts have on the balance sheet and profits?
* What will happen to coal price? Thermal coal prices benchmark US$125, spot US$100 at 16th Oct 2008.
Company Profile
Macarthur Coal’s principal product is low volatile pulverised coal injection coal (LV PCI) for use in the production of steel.
Macarthur Coal is a major supplier of LV PCI coal to the steel mills of Asia, Europe and Brazil and also produces some thermal and coking coal. (From FP: PCI coal can be utilised in the steel-making process in blast furnaces, making it a cheaper alternative for those steel producers looking for a cheaper alternative to more expensive coking coal)
Macarthur Coal’s major assets are a 73.3% share in Coppabella Mine and Moorvale Mine through the Coppabella & Moorvale Joint Venture (CMJV) (which together provide approximately one third of the total volume of LV PCI coal exported from Australia) and a 74.66% share of the Middlemount Mine project.
Macarthur Coal has large prospective exploration tenement holdings which provide a project portfolio for the development of new coal mines.
2009 Goals
Coppabella Mine: 3m tonnes
Moorvale Mine: 1.95m tonnes
Q1 FY09 (announced 16th Oct 2009)
Production 1.1m tonnes, with quarterly production to improve over course of year as Coppabella Mine still recovering from floods.
Demand for coal still striong
Half year profit forecast: $150m - $160m
Payout 50% of NPAT as dividends
2008 Results to 30th June
Revenue $400m
NPAT from operations $55.6m
EPS 36.6c
Div 17c
Cash from operations: negative $36m (positive $30m in 2007)
Cash balance: $22.5m
Loans and borrowings: $48m
Volumes
Coal production: 3.5m tonnes (rain affected year)
Top Sales Destinations & Customers
Europe 36%
Japan 26%
Brazil 17%
Korea 11%
Strong and diverse international customer base maintained which includes most of the world’s top steel producers
Contract executed for supply to Dragon Steel Corporation, a company constructing a new integrated steel plant in Taiwan
A memorandum of understanding signed with Hyundai Steel, a company constructing a new integrated steel plant in the Republic of Korea
Wednesday, November 12, 2008
Thursday, November 6, 2008
Stock Research: Tap Oil (TAP)
Share price: 60 cents
Shares out: 156,487,000
Market cap: $94m
Cash as at 31st Oct 2008: $60m, down from $100m at 31st Dec 2007. No exploration success. Spent $32m in Sept 08 quarter on exploration for no return.
Summary
- Generating ~$40m to $50m cashflow per annum, in steady production state, but production steady to falling.
- Shares are very cheap. Market cap $90m less cash $60m = EV $30m.
- Requires drilling success for major share price catalyst.
- Downside very limited. Upside significant.
- Near term catalyst valuation only and/or uplift in oil price (currently US$60 or A$85 with A$1 = US$0.70) as major exploration prospects don't drill for another 9 -12 months.
Major Exploration Prospects
- Block M onshore Brunei (Tap 39%, Operator). Two appraisal wells called Mawar-1 and Mawar-2) to be drilled in April/May 2009.
- Carnarvon Basin:
* WA-351-P (LNG, Tap 25%). Drill late 2009. Non-operator risk.
* WA-191-P. Fletcher 3 (Tap 10.93%) appraisal well drilled Nov 08.
Full drilling programme on p6.
http://www.asx.com.au/asxpdf/20081031/pdf/31d9t1k4yqnprv.pdf
Why are the shares cheap?
- Falling oil price
- No recent exploration success...does it suggest future exploration will also be disappointing?
- Varanus Island incident on 3rd June 2008 meant production shut down. This is subject to an insurance claim, plus production will be back to normal by end 2008.
- Caught up in the general equity and energy stocks sell off.
Production
Wollybutt (Tap 15%, ENI Operator)
Production stable at 12,000 bopd (1,800 net to Tap)
31st Oct: "Field going into natural production decline in the coming months"
http://www.asx.com.au/asxpdf/20081031/pdf/31d9ygx37w60pv.pdf
Harriet (Tap 12.23%, Apache operator)
Potential production 10,000 bopd (1,223 net to Tap)
Gas 115TJ per day
John Brookes (Tap 100%)
Gas resale, gas bought at 2005 prices.
Generates $25-30m revenue per annum.
Shares out: 156,487,000
Market cap: $94m
Cash as at 31st Oct 2008: $60m, down from $100m at 31st Dec 2007. No exploration success. Spent $32m in Sept 08 quarter on exploration for no return.
Summary
- Generating ~$40m to $50m cashflow per annum, in steady production state, but production steady to falling.
- Shares are very cheap. Market cap $90m less cash $60m = EV $30m.
- Requires drilling success for major share price catalyst.
- Downside very limited. Upside significant.
- Near term catalyst valuation only and/or uplift in oil price (currently US$60 or A$85 with A$1 = US$0.70) as major exploration prospects don't drill for another 9 -12 months.
Major Exploration Prospects
- Block M onshore Brunei (Tap 39%, Operator). Two appraisal wells called Mawar-1 and Mawar-2) to be drilled in April/May 2009.
- Carnarvon Basin:
* WA-351-P (LNG, Tap 25%). Drill late 2009. Non-operator risk.
* WA-191-P. Fletcher 3 (Tap 10.93%) appraisal well drilled Nov 08.
Full drilling programme on p6.
http://www.asx.com.au/asxpdf/20081031/pdf/31d9t1k4yqnprv.pdf
Why are the shares cheap?
- Falling oil price
- No recent exploration success...does it suggest future exploration will also be disappointing?
- Varanus Island incident on 3rd June 2008 meant production shut down. This is subject to an insurance claim, plus production will be back to normal by end 2008.
- Caught up in the general equity and energy stocks sell off.
Production
Wollybutt (Tap 15%, ENI Operator)
Production stable at 12,000 bopd (1,800 net to Tap)
31st Oct: "Field going into natural production decline in the coming months"
http://www.asx.com.au/asxpdf/20081031/pdf/31d9ygx37w60pv.pdf
Harriet (Tap 12.23%, Apache operator)
Potential production 10,000 bopd (1,223 net to Tap)
Gas 115TJ per day
John Brookes (Tap 100%)
Gas resale, gas bought at 2005 prices.
Generates $25-30m revenue per annum.
Wednesday, August 27, 2008
Stock Research: Redflex (ASX:RDF)
Redflex Holdings Limited is an Australia-based company engaged in traffic management, road safety, defense, transport, security and communication products. The Company provides red light and speed photo enforcement systems and back office processing services in Australia and US.
Share price: $2.70
Market Cap: $240m
Year end: June 30th
Pros
- Strong market leader
- High operating margins
- Excellent recurring revenue
Cons
- Need to check debt and cashflow
- Stated ROE 15%
- High CAPEX
- NPAT $10.6m -> P/E 22 (trailing)
Current Forecasts
EPS(c) PE Growth
Year Ending 30-06-09 15.2 18.0 33.3%
Year Ending 30-06-10 19.9 13.8 30.9%
Growing fast but need a higher margin of safety...share price ~$2.30
Share price: $2.70
Market Cap: $240m
Year end: June 30th
Pros
- Strong market leader
- High operating margins
- Excellent recurring revenue
Cons
- Need to check debt and cashflow
- Stated ROE 15%
- High CAPEX
- NPAT $10.6m -> P/E 22 (trailing)
Current Forecasts
EPS(c) PE Growth
Year Ending 30-06-09 15.2 18.0 33.3%
Year Ending 30-06-10 19.9 13.8 30.9%
Growing fast but need a higher margin of safety...share price ~$2.30
Stock Research: QMASTOR (ASX:QML)
QMASTOR Limited is engaged in the provision of operations, marketing, logistics and commercial software and services for the bulk material industries, particularly mining.
Share price: 34 cents
Market cap: $14m
Year end: 30th June
Pros
- Software group, selling to mining industry.
- 2008 a breakout year
- 2009 revenue forecast to grow 80% to $9m
- Recurring revenue streams via software licenses.
Cons
- Hard to judge their competitive position.
- Cash generation not great.
- 2009 EPS forecast 3.25 to 4 cents, vs 3.05 cents in 2008. Heavy investment in R&D and international investment costs.
Share price: 34 cents
Market cap: $14m
Year end: 30th June
Pros
- Software group, selling to mining industry.
- 2008 a breakout year
- 2009 revenue forecast to grow 80% to $9m
- Recurring revenue streams via software licenses.
Cons
- Hard to judge their competitive position.
- Cash generation not great.
- 2009 EPS forecast 3.25 to 4 cents, vs 3.05 cents in 2008. Heavy investment in R&D and international investment costs.
Monday, August 25, 2008
Stock Research: ASG Group (ASX:ASZ)
ASG Group Limited (ASG) is a provider of information technology (IT) services to the users of mid range computers for enterprise systems delivery. The Company provides solutions to address clients business requirements in the areas of infrastructure and applications management outsourcing, Oracle e-Business suite implementation and support, applications development, business intelligence solutions, systems integration, IT service management and specialist technical services.
Pros
- Strong recurring revenue
- Decent competitive advantage
- Many government contracts
- Operating margins ~14%
Cons
- Facing economic headwinds
- Capitalises software development costs
- Poor operating cashflow
- Impossible to raise operating margins materially as ASG are a management consultancy company.
Valuation
- Share price as at 26th Aug 2008: 90 cents, market cap $116m
- Forward P/E: ~9
Bottom Line
- A GARP share, with no obvious share price catalyst
- Would like to see an improvement in cashflow
- Would like an even larger margin of safety with the share price
Pros
- Strong recurring revenue
- Decent competitive advantage
- Many government contracts
- Operating margins ~14%
Cons
- Facing economic headwinds
- Capitalises software development costs
- Poor operating cashflow
- Impossible to raise operating margins materially as ASG are a management consultancy company.
Valuation
- Share price as at 26th Aug 2008: 90 cents, market cap $116m
- Forward P/E: ~9
Bottom Line
- A GARP share, with no obvious share price catalyst
- Would like to see an improvement in cashflow
- Would like an even larger margin of safety with the share price
Sunday, August 24, 2008
Company Watchlist
DQ Entertainment (LSE: DQE) - Manek Growth
Animation and game art content production company
Rensburg Sheppards (LSE: RBG)
Fund manager with good performance
RWS Holdings (LSE: RWS) - Liontrust
A group engaged in the provision of intellectual property support services to the pharmaceutical chemical medical telecoms aerospace defense and automotive
industries.
Ora Capital Partners (LSE: ORA) - Blackrock UK Smaller Companies
The growth and development of businesses in which ORA has or acquires either a significant minority or a majority shareholding. ORA's holding generally results from participation in the formation of new businesses or from acquisitions.
Animation and game art content production company
Rensburg Sheppards (LSE: RBG)
Fund manager with good performance
RWS Holdings (LSE: RWS) - Liontrust
A group engaged in the provision of intellectual property support services to the pharmaceutical chemical medical telecoms aerospace defense and automotive
industries.
Ora Capital Partners (LSE: ORA) - Blackrock UK Smaller Companies
The growth and development of businesses in which ORA has or acquires either a significant minority or a majority shareholding. ORA's holding generally results from participation in the formation of new businesses or from acquisitions.
Wednesday, July 23, 2008
Stock Research: Incremental Petroleum (IPM)
Strategy: Acquire low risk oil and gas assets and apply technical expertise to develop the assets and their productivity.
Main asset: Selmo oil field in Turkey. 500 million barrels in place with 83 million barrels produced to date. Expected to generate around $20m cashflow per annum for next 2-3 years.
Shares out: 79m
Recent Share Price (24th July 2008): $1.05
Market cap: $83m
Dividends -> 6 cents in past 12 months.
Net cash balance at 30th June 2008 -> $9.5m
Financial year ends 31st December
2007
Revenue $40m
NPAT $10.7m
EPS 16 cents
P/E 6.6
Q2 2008 (to June 30) report
http://www.asx.com.au/asxpdf/20080724/pdf/31b9sq4wyjkr68.pdf
Q2 2008 Q1 2008
Net Production (BBL) 113k 116k
Ave Daily Prodn (BBL) 1,247 1,295
Ave Price (US$) $118 $90
Revenue ($A) $14.0m $11.6m
BJ estimates
Selmo 2008
Ave Daily Prodn (BBL) 1,300
Oil Price $110
Annualised revenue $50m
Net Profit Margin 30%
NPAT $15m
EPS 19 cents
P/E 5.5
Tricom report 30th June 2008
http://www.incrementalpetroleum.com/reports/IPM_EDIRNE_DRILLING_080630.pdf
2009 revenue estimate: $70m (includes Erdine revenue at oil at $120/ BBL - may be optimistic)
Verdict:
2009/10 cashflow ~$30m, equating to a P/cashflow of around 3.
Exploration prospects on top
Little or no debt
Risks
- Lower oil price
- Delays/downgrades to Erdine project
- Exploration disappointments
Erdine Gas Project, West Turkey (IPM 55%)
7 gas discoveries from 7 drilled wells.
Production planned mid 2009
Potential cashflow to IPM of around $10m, based on 9mmcf/d
Exploration, Turkey
8 exploration licenses awarded in May 2008
USA Projects
5 projects totaling 19,000 acres in San Joaquin Basin, central California.
1) Kettleman Middle Dome (IPM 10%)
Operating and producing field. Revenues cover US costs. Royalty of 25% of gross proceeds applies.
Significant production from new wells planned to commence in 2009.
2) Shallow Gas Project (IPM 50% and operator)
Rig slots booked in Q4 2008. If successful, begin production by end 2009.
Main asset: Selmo oil field in Turkey. 500 million barrels in place with 83 million barrels produced to date. Expected to generate around $20m cashflow per annum for next 2-3 years.
Shares out: 79m
Recent Share Price (24th July 2008): $1.05
Market cap: $83m
Dividends -> 6 cents in past 12 months.
Net cash balance at 30th June 2008 -> $9.5m
Financial year ends 31st December
2007
Revenue $40m
NPAT $10.7m
EPS 16 cents
P/E 6.6
Q2 2008 (to June 30) report
http://www.asx.com.au/asxpdf/20080724/pdf/31b9sq4wyjkr68.pdf
Q2 2008 Q1 2008
Net Production (BBL) 113k 116k
Ave Daily Prodn (BBL) 1,247 1,295
Ave Price (US$) $118 $90
Revenue ($A) $14.0m $11.6m
BJ estimates
Selmo 2008
Ave Daily Prodn (BBL) 1,300
Oil Price $110
Annualised revenue $50m
Net Profit Margin 30%
NPAT $15m
EPS 19 cents
P/E 5.5
Tricom report 30th June 2008
http://www.incrementalpetroleum.com/reports/IPM_EDIRNE_DRILLING_080630.pdf
2009 revenue estimate: $70m (includes Erdine revenue at oil at $120/ BBL - may be optimistic)
Verdict:
2009/10 cashflow ~$30m, equating to a P/cashflow of around 3.
Exploration prospects on top
Little or no debt
Risks
- Lower oil price
- Delays/downgrades to Erdine project
- Exploration disappointments
Erdine Gas Project, West Turkey (IPM 55%)
7 gas discoveries from 7 drilled wells.
Production planned mid 2009
Potential cashflow to IPM of around $10m, based on 9mmcf/d
Exploration, Turkey
8 exploration licenses awarded in May 2008
USA Projects
5 projects totaling 19,000 acres in San Joaquin Basin, central California.
1) Kettleman Middle Dome (IPM 10%)
Operating and producing field. Revenues cover US costs. Royalty of 25% of gross proceeds applies.
Significant production from new wells planned to commence in 2009.
2) Shallow Gas Project (IPM 50% and operator)
Rig slots booked in Q4 2008. If successful, begin production by end 2009.
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