Whitehaven shares tumble despite swing to profit

Whitehaven Coal’s shares have plunged as much as 16pc a day after posting a swing to profit.

Whitehaven Coal has surprisingly seen its shares tumble as much as 16 per cent a day after it released a full-year earnings report that largely beat market expectations.

The coal producer neared a one-year high yesterday, closing 3.9 per cent stronger at $2.12 after it swung back to profit for the year to June 30.

Analysts were largely effusive in their response to the report, talking up the company’s better-than-expected cost-cutting endeavours.

It pointed to a steady session today after the strong run-up yesterday, but despite a flat open, the group has been punished by traders through the morning.

At one stage the company saw its shares plunge 16 per cent to $1.78, although by 12pm (AEST) it had recovered marginally to trade down 11.8 per cent at $1.87.

The shock downward move has wiped $250 million from its valuation.

The vicious sell-off came as trading volumes were seen four times above the average morning activity for Whitehaven.

In notes to investors over the past 24 hours, Ord Minnett, UBS, Deutsche, Morgan Stanley and Morgans all retained their ratings on Whitehaven stock, with several sharply upgrading their target prices to reflect higher coal prices and the steady fiscal 2016 earnings result.

Ord Minnett lifted its target price by 60c to $2, UBS raised its by 40c to $2.15 and Morgans tacked on almost 50c to its prior target, settling on $1.90.

Morgans was possibly the most restrained in its view despite the upgraded target, noting prices could soon come under pressure.

“Industry feedback implies that short-term coal prices are overdue a pullback,” the broker said.

“However, this is weighed against WHC’s leverage to the upside coal price scenario and the likely premium it attracts as one of few surviving listed pure coal plays able to leverage surging prices.”

UBS also displayed caution in saying the group looked “quite fully valued”, but such commentary would not serve as the cause for a sudden 16 per cent dive in valuation.