I understand that, when valuating the company, you are trying to figure out how the market can value it more than calculating the intrinsic value.
In the case of this company which has a pretty limited production in years, to my undestanding, it would be more indicative on how far current price is from intrinsic value making a simple DCF calculation using for 2024-2029 conservative normalized scenarios. By doing that the current valuation looks simply ridiculous.
Although as shareholders we would like to see more allocation on buybacks or dividends, I understand that management tries to find a future for the continuation of the company and there is no reason, At least I don't find it, to think that the management will take a really wrong decision both because they are very large shareholders and the decisions they took in the past were very good for creating value (example repurchase of debt in 2020)
I thought about it, I think it's actually a perfect company to use a DCF given that you know more or less the time left of the mines, but I decided not so since there's different very volatile variables. ICI4 pricing for one, but also the cash costs have been very volatile this past year, so it was hard to do the DCF without knowing which cash-costs could we expect over the life of the mine.
What is the definition of a "fat dividend" for you? the currenty div yield for Geo is around 30% and they are doing BB as well (but I agree that not as much agreed on that)
Also need to add that South African companies probably won't have the same sort of hmmm management and "corp governance" issues that you are likely to encounter with Indonesian companies... 🤭🤭🤭
- "Exxaro (primarily in coal with a growing renewable energy solutions business and equity-accounted investments in ferrous iron ore and zinc plus plans to invest and diversify into manganese, bauxite and copper) are all expected to benefit from elevated cash flows which will support high levels of dividends and buybacks."
- "Thungela (thermal coal from seven mining operations in South Africa)"
Great analysis, all points considered, it looks like it has more upside than downside. It's good that you mentioned that management has big ownership stake, so even if they have other interests, they wont go full crazy. IMO it deserves a very low price given low reserves, a possible acquisition and rising extraction costs. But it should not be SO low. We will soon see negatvie EV as you said. Might start a position. Gracias!
Thanks a lot for the analysis.
I understand that, when valuating the company, you are trying to figure out how the market can value it more than calculating the intrinsic value.
In the case of this company which has a pretty limited production in years, to my undestanding, it would be more indicative on how far current price is from intrinsic value making a simple DCF calculation using for 2024-2029 conservative normalized scenarios. By doing that the current valuation looks simply ridiculous.
Although as shareholders we would like to see more allocation on buybacks or dividends, I understand that management tries to find a future for the continuation of the company and there is no reason, At least I don't find it, to think that the management will take a really wrong decision both because they are very large shareholders and the decisions they took in the past were very good for creating value (example repurchase of debt in 2020)
I thought about it, I think it's actually a perfect company to use a DCF given that you know more or less the time left of the mines, but I decided not so since there's different very volatile variables. ICI4 pricing for one, but also the cash costs have been very volatile this past year, so it was hard to do the DCF without knowing which cash-costs could we expect over the life of the mine.
sadly management team sucks, what you want to see in a coal company is huge buybacks and fat divies, but now, they are hoarding cash like dumbasses
What is the definition of a "fat dividend" for you? the currenty div yield for Geo is around 30% and they are doing BB as well (but I agree that not as much agreed on that)
Also need to add that South African companies probably won't have the same sort of hmmm management and "corp governance" issues that you are likely to encounter with Indonesian companies... 🤭🤭🤭
Some South African funds had mentioned these two coal stocks which I talked about here: https://emergingmarketskeptic.substack.com/p/em-fund-stock-picks-commentary-january-24-2023
- "Exxaro (primarily in coal with a growing renewable energy solutions business and equity-accounted investments in ferrous iron ore and zinc plus plans to invest and diversify into manganese, bauxite and copper) are all expected to benefit from elevated cash flows which will support high levels of dividends and buybacks."
- "Thungela (thermal coal from seven mining operations in South Africa)"
The drop in recent weeks is scary, not sure if this was manipulated or some bad news that we don't know
Great analysis, all points considered, it looks like it has more upside than downside. It's good that you mentioned that management has big ownership stake, so even if they have other interests, they wont go full crazy. IMO it deserves a very low price given low reserves, a possible acquisition and rising extraction costs. But it should not be SO low. We will soon see negatvie EV as you said. Might start a position. Gracias!