Analysts savage Whitehaven Coal
Analysts have heaped insult on injury over Whitehaven Coal’s ‘weak’ financial year first half.
Analysts have heaped insult on injury over Whitehaven Coal’s “weak” financial year first half, questioning whether it will be able to meet downgraded production guidance and criticising its decision to draw down debt in 2019 to pay its full-year dividend.
Whitehaven said on Thursday operational issues at its flagship Maules Creek, including bushfires, drought and a shortage of skilled staff, and falling coal prices had led to a 91 per cent drop in net profit to $27.4m, after a 30 per cent drop in revenue.
Earnings before interest, tax, depreciation and amortisation tumbled 68 per cent to $177.3m.
The results were weaker than analyst expectations, with Macquarie staff calling the EBITDA result a “material miss in earnings”, with cashflow also lower than expectations.
Whitehaven downgraded its production outlook in December on the back of the problems at Maules Creek of 19 million to 20 million tonnes of coal sold at an average unit production cost of $73 to $75 a tonne.
Macquarie analysts said the risk of further downgrades remained, given its two major mines would need to perform at near-record rates to hit even the bottom end of current guidance, cutting their price target by 15 per cent to $2.20 a share in a client note on Friday.
“Narrabri would need to effectively produce at a record rate in the half to achieve the bottom end of its guidance. There is also risk of a further downgrade at Maules Creek should the staffing issues persist,” Macquarie said.
Morgan Stanley’s Rahul Anand said the stock remained cheap at current levels, despite the “weak” first half, saying he remained an “over weight” recommendation on its present valuation and the potential of production growth from its Vickery and Winchester South projects, both in the NSW government approvals process.
But Ord Minnett research analyst Dylan Kelly savaged the result, saying it made Whitehaven “easy to dislike”, while noting its share price, which has tumbled more than 50 per cent from its $4.61 high of almost a year ago to $2.24 on Friday, was trading below his $3 a share net present valuation of the stock.