煤炭行业q3预测回顾

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1、Coal:nowdiversifiedminers'bestsegmentWereviewourQ3forecastsforcoalNorthAmericaEquityResearch12October2018TheFThighlightedyesterdayhowtheCinderellacoalbusinessisnowthebestsectorforsomediversifiedminers.TheoutlookformetcoalissufficientlystrongforPeabodytoadjustlastyear’sstrategyandinvest,in

2、cludingnowthepurchaseofShoalCreekfromDrummond.Therewasalsospeculation(yettobedenied)intheWSJthatBTUmighthaveaninterestinDrummond’sColombianthermalcoalassets.Yetlargelylandlockedwesternminersremainpressuredbylow-pricednaturalgasandgrowthinrenewables,andafteralongfightWestmorelandsuccumbedto

3、Chapter11onMonday.USexportsareapproachingrecordlevelsascoal,whichhasbeenshunnedbyutilities,isbeingreceivedwarmlyinternationally.·ShoalCreekbringsBTUbacktoUSmetcoalandpositionsittoconsolidateSouthernAppalachiainanydownturn.Peabodyhasadjusteditsstrategysinceemergingfromreorganizationtogivegr

4、eateremphasistometcoal,soShoalCreekallowsittostrengthenitsproductionofthiscriticalrawmaterialforsteelmaking.·AsreportedintheWSJ,PeabodymaybetemptedbyDrummond’sColombiancoalassets.Yetwefeelapurchasewouldcreateseveralproblems:oPeabodyhascarvedoutanewshareholderbasethatismainlyinterestedindiv

5、idendsandbuybacks.oPure-playcoalproducersfacestiffcompetitionfromdiversifiedminersthatareabletocross-subsidizebusinesses.oLowenergycoal,likethatfromColombiaandIndonesia,istradingatadiscounttohigherBTUcoal.·Werecentlyupdatedourseabornecoalpriceforecastsinourglobalcoalnote(here)andhavefreshe

6、nedourUSdomesticforecastsinthetableonpage7.Ourconclusionremainsthatduetothecoalsector’sincreasedbarrierstoentryanddisincentivestoinvest,themarketlookssettoremaintight,deliveringhealthymarginsatleastforthenextfewyears.·ThecoalequitiescontinuetolookhistoricallycheapandtradeatprospectiveEV/EB

7、ITDAmultiplesbelowthehistorical5-8Xmultiples.Aportionofthisisprobablyduetothecontinued—andwellabovemarketclearinglevels—coalprices.HoweverPeabody’spriceseemstohavebeendiscountedbytheNorthGoonyellaoutageandprobablyfearoflargescaleM&A.PreciousMetals&CoalJohnBri