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Bell Potter and Macquarie bullish on Whitehaven Coal following latest quarterly

Mon 23 Jan 23, 1:25pm (AEST)
Coal truck driving along mine path
Source: iStock

Key Points

  • Bell Potter has given Whitehaven a “buy” rating even as 2022 energy volatility trends are subdued year on year
  • Macquarie Bank also gives the company a 12-month $12.50 price target on Monday reflecting a total potential return over 40%
  • These moves come as Whitehaven posts $1bn cash generation in 4Q 2022

ASX-listed coal heavyweight Whitehaven (ASX:WHC) was given a buy rating by Bell Potter on Monday. 

Also on Monday, a research note from Macquarie bank put forward bullish sentiment on the stock as the company’s latest quarterly result saw an impressive $1bn in cash generation. 

Over the first half of the 2023 financial year, WHC has generated $2.5bn in earnings, according to its latest report

Two different price targets are given to the stock by the two brokers. 

  • Bell Potter: $10.50 a share 

  • Macquarie Bank: $12.50 a share 

Both note the largest risk to Whitehaven’s forward earnings is coal price volatility, as well as capex and regulatory uncertainty (read: no absolute guarantee key permits needed for project expansions will be awarded in the coming years.) 

Bell Potter’s take 

Bell Potter values the company based on its models of operating assets “consistent with the company’s FY22 cost guidance.” 

First and foremost, Potter has its eyes on the company’s 75% owned Maules Creek project which boasts a mine life to 2050 and produces an average of 12-12.5 million tonnes per annum (Mtpa). 

Potter notes output is set to hit 16Mtpa in early 2024, pending required approvals. 

Whitehaven’s Narrabri mine, 77.5% owned by WHC, is also a money-maker, according to Potter. The broker notes a mine life into 2045, assuming that Stage 3 Extensions to the project are approved. 

Two other Whitehaven mines, Tarrawonga and Werris Creek, also feed into the broker’s positive narrative. 

But Bell Potter doesn’t consider either the company’s Vickery mine extension, or the Winchester South metallurgical coal play project, in its valuation. These projects carry large risk discounts, as far as Potter is concerned. 

Macquarie’s take 

Macquarie Bank noted that the latest quarterly earnings for Whitehaven were above expectations, with the realised thermal coal price of US$351 per tonne still remaining strong over pre-COVID levels. 

Macquarie Bank maintains an outperform ranking on Whitehaven. 

Stronger coal production has fed into stronger sales given the elevated prices, and Macquarie’s valuation on Whitehaven focuses more on earnings than does Bell Potter’s, summarily explaining the difference between price targets. 

Both entities noted that more desirable east coast weather conditions (read: less floods) have also helped Whitehaven’s overall performance. 

A look at WHC's one year chart
A look at WHC's one year chart

 

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Written By

Jonathon Davidson

Finance Writer

Jonathon is a journalism graduate and avid market watcher with exposure to governance, NGO and mining environments. He was most recently hired as an oil and gas specialist for a trade publication.

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