Friday, 27 Jan 2012
Bloomberg reported that Walter Energy Inc may finally lure buyers willing to bet on a recovery in coal prices with the industry's cheapest stock.
According to data compiled by Bloomberg, after losing almost half its value in the past year, the producer of steelmaking coal sold for 9.3 times earnings this week. That was less than any North American coal mining company with USD 1 billion in market capitalization. The slide also drove down the value of Walter Energy to 1.7 times its net assets this month, the lowest since the last bear market in US equities.
While a surge in coal prices last year led to the biggest wave of coal deals, most acquirers were left with losses as demand for the commodity collapsed. Walter Energy, which bought Western Coal Corporation for USD 5.3 billion in April, is an attractive target because it produces high grade steelmaking coal. A buyer could spend double Walter Energy’s closing price of USD 67.54 a share yesterday and still get the company for less relative to earnings than any coal takeover in the past year.
Mr J Christopher Haberlin analyst at Davenport & Co said that "Now is the opportune time for a buyer to potentially start looking at them. It's some of the best coal in the world and it's what steelmakers want. If somebody did make a run at Walter here, certainly they could take Walter out a price much lower than where that valuation may have been."
Walter Energy may attract interest from BHP Billiton Limited, Anglo American Plc or ArcelorMittal, and could command as much as USD 120 a share in an acquisition.
(Sourced from www.bloomberg.net)
Showing posts with label Walters Energy. Show all posts
Showing posts with label Walters Energy. Show all posts
Friday, January 27, 2012
Saturday, October 15, 2011
Coal miner Walter's shares rise on takeover talk
Sat, Oct15, 2011
* Stock rises for second consecutive day
* Two newspaper reports say Walter Energy is target
(Reuters) - Shares of Walter Energy rose for a second day on Friday on reports that the U.S. coal mining company is the target of a takeover.
The newspaper, The Australian, reported that BHP Billiton , the world's largest mining company, is considering a $6 billion bid for the company. It cited no sources.
On Thursday, a British newspaper, The Independent, said BHP and Anglo American were interested in acquiring Walter, which has large reserves of steel-making metallurgical coal. That report said Anglo had poured cold water on such talk when it first came up in September.
BHP declined to comment. The company has flagged that it would chase acquisitions in commodities where it is not one of the leading players, after it was forced to scrap three big takeovers between between 2008 and 2010 on competition and political concerns.
As one of the world's biggest coal producers, it would be likely to run into competition hurdles if it bid for Walter Energy.
UBS analyst Glyn Lawcock played down the likelihood that BHP would be interested in Walter Energy as BHP has the ability to double coking coal production from its Australian operations and is also focusing on Indonesia.
"U.S. coal producers are generally higher cost and lower margin than Australian assets within BHP current portfolio. I'm not sure why BHP would want to do it," he said.
A spokesman for Alabama-based Walter said the company would not comment on speculation
The company's shares rose 12 percent on Thursday and jumped 6 percent on Friday morning before easing to close up 2.8 percent at $77.36.
Analyst Lucas Pipes, of Brean Murray Carret & Co, said the price rise was clearly linked to the market talk that Walter was a target.
He said U.S. coal producer Peabody Energy and European steelmaker ArcelorMittal had just received final approval to go ahead with their joint acquisition of Australian miner Macarthur Coal .
"That indicates there's still a lot of demand for met coal reserves and Walter falls into that category," Pipes said.
Other U.S. coal stocks rose on Friday on macro-economic issues, analysts said. Alpha Natural Resources ended up 4.8 percent to $21.65, Arch Coal finished 4.4 percent higher at $17.50 and Peabody Energy rose 3.2 percent to $39.46. The Dow Jones coal index closed 4.4 percent higher.
* Stock rises for second consecutive day
* Two newspaper reports say Walter Energy is target
(Reuters) - Shares of Walter Energy rose for a second day on Friday on reports that the U.S. coal mining company is the target of a takeover.
The newspaper, The Australian, reported that BHP Billiton , the world's largest mining company, is considering a $6 billion bid for the company. It cited no sources.
On Thursday, a British newspaper, The Independent, said BHP and Anglo American were interested in acquiring Walter, which has large reserves of steel-making metallurgical coal. That report said Anglo had poured cold water on such talk when it first came up in September.
BHP declined to comment. The company has flagged that it would chase acquisitions in commodities where it is not one of the leading players, after it was forced to scrap three big takeovers between between 2008 and 2010 on competition and political concerns.
As one of the world's biggest coal producers, it would be likely to run into competition hurdles if it bid for Walter Energy.
UBS analyst Glyn Lawcock played down the likelihood that BHP would be interested in Walter Energy as BHP has the ability to double coking coal production from its Australian operations and is also focusing on Indonesia.
"U.S. coal producers are generally higher cost and lower margin than Australian assets within BHP current portfolio. I'm not sure why BHP would want to do it," he said.
A spokesman for Alabama-based Walter said the company would not comment on speculation
The company's shares rose 12 percent on Thursday and jumped 6 percent on Friday morning before easing to close up 2.8 percent at $77.36.
Analyst Lucas Pipes, of Brean Murray Carret & Co, said the price rise was clearly linked to the market talk that Walter was a target.
He said U.S. coal producer Peabody Energy and European steelmaker ArcelorMittal had just received final approval to go ahead with their joint acquisition of Australian miner Macarthur Coal .
"That indicates there's still a lot of demand for met coal reserves and Walter falls into that category," Pipes said.
Other U.S. coal stocks rose on Friday on macro-economic issues, analysts said. Alpha Natural Resources ended up 4.8 percent to $21.65, Arch Coal finished 4.4 percent higher at $17.50 and Peabody Energy rose 3.2 percent to $39.46. The Dow Jones coal index closed 4.4 percent higher.
Thursday, March 3, 2011
Western Coal CEO to run Walter Energy after merger
Thursday, 03 Mar 2011 |Reuters|
Reuters reported that coal company Walter Energy Inc, which is in the process of buying Canada's Western Coal, said that Western CEO Mr Keith Calder will take the reins of the combined company after the deal is completed.
Walter Energy's interim CEO Mr Joe Leonard will step down from that position, but will remain on the company's board. The company said it expects the deal to close on April 1st 2011.
Walter agreed to buy Western Coal for USD 3.3 billion in December 2010, in a deal that will put it on track to becoming the world's No 3 producer of steel making metallurgical coal at a time of booming demand.
Mr Calder has been at the helm of Western Coal since late 2009 and was managing director of Rio Tinto's copper projects previously.
Western Coal has also nominated Mr Calder, Mr David Beatty and Mr Graham Marshall to serve on Walter's board.
Reuters reported that coal company Walter Energy Inc, which is in the process of buying Canada's Western Coal, said that Western CEO Mr Keith Calder will take the reins of the combined company after the deal is completed.
Walter Energy's interim CEO Mr Joe Leonard will step down from that position, but will remain on the company's board. The company said it expects the deal to close on April 1st 2011.
Walter agreed to buy Western Coal for USD 3.3 billion in December 2010, in a deal that will put it on track to becoming the world's No 3 producer of steel making metallurgical coal at a time of booming demand.
Mr Calder has been at the helm of Western Coal since late 2009 and was managing director of Rio Tinto's copper projects previously.
Western Coal has also nominated Mr Calder, Mr David Beatty and Mr Graham Marshall to serve on Walter's board.
Wednesday, January 26, 2011
Best Bets in the Coal Sector
Investorsoapbox PM FRIDAY, JANUARY 14, 2011FBR Capital Market
We are dialing beta modestly in the coal group despite increasing our metallurgical-coal price (5%-11%), estimates (10%) and price targets (6%), essentially taking a breather after the phenomenal run in the space over the past six- and one-month periods.
As a result, we are downgrading Patriot Coal (ticker: PCX) and Walters Energy (WLT) to Market Perform from Outperform and would advise investors to move toward the lower-beta names in the space in the meantime ( Peabody Energy (BTU), Consol Energy (CNX), Arch Coal (ACI), Alpha Natural Resources (ANR), Cliffs Natural Resources (CLF), and Cloud Peak Energy (CLD)).
The risk to our downgrade is that rains [floods in Australia] reemerge and take additional met coal off the market (now forecasted at 13 million metric tons (tonnes), from eight million tonnes), but the rails and ports are starting to come back while the rains take a break. We are leaning more toward steam, as steam-coal prices are rising and supply/demand tightness is deeper and should last for at least another year. We are trimming our fourth-quarter 2010 estimates, too, but believe most investors are more focused on the rains' impact than the short-term and the traditional volatile earnings season. Presently, the coal group trades at 2011-2013 enterprise value/earnings before interest, taxes, depreciation and amortization (EV/Ebitda) estimates of 7.5 times, 6.3 times and 5.5 times, respectively (a one times expansion despite higher-forecasted met-coal prices) and has about 10% upside after the recent performance.
The risk to our downgrade is that rains [floods in Australia] reemerge and take additional met coal off the market (now forecasted at 13 million metric tons (tonnes), from eight million tonnes), but the rails and ports are starting to come back while the rains take a break. We are leaning more toward steam, as steam-coal prices are rising and supply/demand tightness is deeper and should last for at least another year. We are trimming our fourth-quarter 2010 estimates, too, but believe most investors are more focused on the rains' impact than the short-term and the traditional volatile earnings season. Presently, the coal group trades at 2011-2013 enterprise value/earnings before interest, taxes, depreciation and amortization (EV/Ebitda) estimates of 7.5 times, 6.3 times and 5.5 times, respectively (a one times expansion despite higher-forecasted met-coal prices) and has about 10% upside after the recent performance.
Since July 6, 2010, Walters had a phenomenal run (true alpha generation), appreciating 124% (26% for S&P 500 and 89% for group). While we continue to like Walter Energy and Western Coal's combined asset base and believe that there is a scarcity value associated with such a premium, high-quality, met-coal pure-play, we believe that it is now fairly valued, given our commodity-price outlook. Furthermore, heightened met-coal euphoria may create unnecessary risk for the stock. However, we will review our ratings as time progresses and a better assessment of met-coal pricing surfaces.
Similarly, Patriot Coal had a phenomenal run over the past month, with the stock appreciating 62.5% (3% for S&P 500 and 21% for group) since our Dec. 20, 2010, upgrade, primarily driven by potential met-coal supply disruption in Australia due to rains. While we agree with the earnings leverage from met-coal pricing (which is getting reflected), we believe that investors also face normal-CAPP risks (rail, geology, natural gas).
We are raising our 2011-2013 met-coal prices to $250 per tonne, $225 per tonne and $220 per tonne, an increase of about 5%-11% from prior estimates. While the risk is still to the upside, we are raising our view of the met-coal price curve and taking a breather for now. As a result, we are raising our earnings-per-share and Ebitda estimates by 14% and 6%, respectively, but trimming the fourth-quarter 2010 by about 10% to account for recent press releases and rail issues. We are raising our met-coal supply disruption out of Australia to 13 million tonnes, from eight million tonnes, with an additional 8.5 million tonnes of steam coal off line.
The Australian rain issue is discounted in the stocks. Met-coal names have rallied on the back of media reports highlighting the impact on coal mines and supply infrastructure. While it could be too soon to gauge the total impact, we estimate that about 13 million tonnes (versus an eight million tonnes estimate on Jan. 3, 2011) of met-coal supply is likely removed from the market. We believe that this situation is now becoming better understood (hyped, in some cases) and discounted in the stocks. While things could get worse, since it is still the rainy/cyclone season, we believe a near-term peak has been reached. Furthermore, we expect coal producers to devise ways (crossover tons, running mines harder, etc.) to make up for lost profit. Furthermore, steelmakers will identify alternate sources of supply, such as U.S. Northern Appalachia (NAPP) coal (which is thermal coal).
Overall, we believe that the coal group is likely to announce fourth-quarter 2010 earnings below consensus (unless expectations are lowered); but investors may shrug this off, given underlying positive trends (supply disruptions, demand recovery, and rising prices). The key themes that could play out/foreshadow this earnings season: 1) rising exports -- steam and met; 2) increasing capital spending; 3) tightening spreads supporting export of crossover product; 4) strategic discussion, including mergers and acqusitions; and 5) production issues/constraints.
We note that some companies (Arch Coal, Peabody, Massey Energy (MEE) and Consol Energy) have already provided revised guidance/production expectations.
-- David M. Khani
We note that some companies (Arch Coal, Peabody, Massey Energy (MEE) and Consol Energy) have already provided revised guidance/production expectations.
-- David M. Khani
-- Mitesh Thakkar
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