Is ASX: WHC anywhere close to a buy bet?


Whitehaven Coal’s Chief Mr. Flynn pointed it out to the International energy agency, that the thermal coal demand which show cases need in south East Asia is expected to be increasing from 187 million tons to 452 million tons by 2040. The increase in the thermal core export shipped out of Australia in the past year is more than double the 200 million tons, when exports hit a record $23 billion. Australia is a proximate source of high quality coal to that demand center, and one of the reasons of low quality coal was worse emission outcomes. The scenario is still questionable given the shift to renewables and there is some risk looming over the metallurgical coal prices that are expected to drop in couple of years from now.

Given the backdrop, Whitehaven Coal Limited (ASX: WHC) is an energy sector stock which is into exploration and coal mining; and has traded at a market price of $5.810 which is near its 52-week high, as at July 09, 2018. The stock has seen a daily price change of -$0.080 or -1.358% on said date. The stock otherwise has risen by 111% over the past 12 months and was seen trading at $ 5.85 as at July 10, 2018, market open. The annual dividend yield of the stock is 3.27% and the most recent dividend declaration was of 13 cents. The P/E ratio of 11.330 is well compared to its peers and the EPS is of AUD 0.513.


ASX: WHC Daily Price Chart as at July 09, 2018, Source: Thomson Reuters

The company is the largest producer of high quality coal from the Gunnedah Basin i.e. high Calorific Value (CV) and low ash and Sulphur. Whitehaven recorded half year net profit of $257.2 million, up 63%, and EBITDA of $460.6 million, which is up by 42% on the prior corresponding period. An interim dividend of $0.13 per share declared recently.

The recent purchase of the Winchester South metallurgical coal project in Queensland provides another growth opportunity beyond Vickery project, while managed saleable coal production is forecast to grow strongly from the startup of the Vickery project. In Australia, in recent years Whitehaven has developed the only new large-scale mines – Narrabri and Maules Creek. Modest increase in exports from Australia – 203Mt in 2017 to 213Mt to 2020 is being led by Brownfield expansions from several mines. Existing operating mines and limited new developments are the focus in the recent M&A activity.

Three of the largest coal users – China, Japan and India will continue to use coal for decades to come as they install new HELE technology (high efficiency, low emission). Many regions are diversifying the energy sources and aim to provide cheap and reliable electricity for their growing populations, however, the countries that do not have indigenous sources of energy are still committing to coal.

According to the demand for both metallurgical and thermal coal, which is expected to continue growing to 2040 and 2035, respectively, coal companies may be the beneficiaries for some more time. The demand growth in Asia is likely to exceed the developed economies in Europe and United States for which the demand is declining, also the demand for high CV clean coal like the one produced by Whitehaven may rise as more HELE power stations are deployed in the region. Many countries including India, Japan and China have included coal use in their respective Nationally determined contributions underpinning coal demand, however, new mines are difficult to develop and finance related issues are cropping up in many jurisdictions. Given the whole scenario and higher trading levels for WHC, it can be watched out while the risks in the coal sector do prevail.


The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. and associated websites are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.

Leave a Reply