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Here’s my analysis on WTN, a Canadian mining company
Current Recommendation: SPECULATIVE BUY
Company name: Western Canadian Coal Corp Ticker: WTN.TO
“Western is a producer of high quality metallurgical and thermal coal from mines located in northeast British Columbia (Canada) and West Virginia (USA). The mines have the capacity to produce 7 million tonnes per year and have over 20 years of coal reserves. Western also owns a 50.6% interest Energybuild (EBG: AIM) which produces high quality anthracite and thermal coal in South Wales (UK). Other interests owned include a 45% interest in Xtract Energy (XTR: AIM), 20% interesting in NEMI Northern Energy & Mining (NNE.A: TSX) and 100% of a small gold and antimony operation in Australia. The Company is headquartered in Vancouver, BC, Canada, and trades on the AIM and TSX stock exchanges under the symbol "WTN". More information can be found at www.westerncanadiancoal.com.”
Please take a look at the company’s snapshot before continuing.
http://www.megaupload.com/?d=I5GVHYRC
WTN have grown greatly on a yearly basis but if you take a look at the most recent quarter in the 2nd snapshot, you might notice that the company weakened considerably in the first fiscal quarter 2010.
On July 13, 2009, WTN closed its deal to buy its major shareholder CAMBRIAN. To review the transaction and to see what it means for WTN, take a look at this report from an analyst at SALMAN Partners from page 2 to 7.
WTN’s value is greatly dependent on coal’s price and the world’s demand for coal. WTN bottom line was greatly improved in 2008-2009 because of a commodity bubble that however ended in mid 2008. In their latest conference call, we’ve learned that the selling price has however greatly dropped for 2010:
“The decrease in sales price is a result of lower coal contract prices for fiscal 2010, which are US$126 per tonne for hard coking coal and US$90 per tonne for ultra-low volatile PCI compared to US$300 per tonne and US$248 per tonne respectively for fiscal 2009.”
Coal futures contracts indicate that the prices have returned to a prebubble level.
Recently, China has started to consume coal again and the demand has nearly doubled compared to last year and WTN note some interest from Europe. Still, the company is currently focusing on cost reduction while maintaining a relatively diminished production and waiting for the return of demand.
As I noted earlier, WTN’s stock price is highly correlated to coal price and its adjusted beta is at 2.2. The stock is greatly volatile and the company retention ratio is at 100%.
The lack of information and knowledge of hard coking coal and PCI pricing and trend stop me from doing a normal DCF so I’ll rely on COMPS and ratios to determine a value.
The COMPS analysis will follow tomorrow. I’m out of time at the moment. I invite you to check the comps Excel file and make your own analysis.
Current Recommendation: SPECULATIVE BUY
Company name: Western Canadian Coal Corp Ticker: WTN.TO
“Western is a producer of high quality metallurgical and thermal coal from mines located in northeast British Columbia (Canada) and West Virginia (USA). The mines have the capacity to produce 7 million tonnes per year and have over 20 years of coal reserves. Western also owns a 50.6% interest Energybuild (EBG: AIM) which produces high quality anthracite and thermal coal in South Wales (UK). Other interests owned include a 45% interest in Xtract Energy (XTR: AIM), 20% interesting in NEMI Northern Energy & Mining (NNE.A: TSX) and 100% of a small gold and antimony operation in Australia. The Company is headquartered in Vancouver, BC, Canada, and trades on the AIM and TSX stock exchanges under the symbol "WTN". More information can be found at www.westerncanadiancoal.com.”
Please take a look at the company’s snapshot before continuing.
http://www.megaupload.com/?d=I5GVHYRC
WTN have grown greatly on a yearly basis but if you take a look at the most recent quarter in the 2nd snapshot, you might notice that the company weakened considerably in the first fiscal quarter 2010.
On July 13, 2009, WTN closed its deal to buy its major shareholder CAMBRIAN. To review the transaction and to see what it means for WTN, take a look at this report from an analyst at SALMAN Partners from page 2 to 7.
WTN’s value is greatly dependent on coal’s price and the world’s demand for coal. WTN bottom line was greatly improved in 2008-2009 because of a commodity bubble that however ended in mid 2008. In their latest conference call, we’ve learned that the selling price has however greatly dropped for 2010:
“The decrease in sales price is a result of lower coal contract prices for fiscal 2010, which are US$126 per tonne for hard coking coal and US$90 per tonne for ultra-low volatile PCI compared to US$300 per tonne and US$248 per tonne respectively for fiscal 2009.”
Coal futures contracts indicate that the prices have returned to a prebubble level.
Recently, China has started to consume coal again and the demand has nearly doubled compared to last year and WTN note some interest from Europe. Still, the company is currently focusing on cost reduction while maintaining a relatively diminished production and waiting for the return of demand.
As I noted earlier, WTN’s stock price is highly correlated to coal price and its adjusted beta is at 2.2. The stock is greatly volatile and the company retention ratio is at 100%.
The lack of information and knowledge of hard coking coal and PCI pricing and trend stop me from doing a normal DCF so I’ll rely on COMPS and ratios to determine a value.
The COMPS analysis will follow tomorrow. I’m out of time at the moment. I invite you to check the comps Excel file and make your own analysis.
Dernière édition par Bona le Mar 29 Sep - 12:15, édité 1 fois
