Thread by @puppyeh1

OK some of these Aussie thermal name valuations just make no sense. Mkt is just so offsides. Prepare for some smooth brain workings to figure out why. Example de jour: Whitehaven $WHC.AX

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Forget COVID or even the European energy crisis and just look at what mkt was willing to pay for this thing pre everything that's happened. last 3yrs.

In FY19 (to June'19), $WHC.AX put up >$1bn of EBITDA (2nd yr running), >50% EBITDA margins ref A$ coal prices at ~$130/t:

Forget where we are w/ coal pxes and earnings power now. These are 20-30yr life mines w/ 50% margins at structurally 'normal' (ie pre Ukraine, pre COVID, pre everything) coal prices.

At the time market was willing to pay 3-4x EV/EBITDA, LSD LTM EV/EBIT, and 7-10% LTM div yield:

If we just assume - somehow - coal pxes tomorrow dropped immediately to these levels ($100/t USD or so), $WHC.AX is still a ~$1bn/yr EBITDA business.

Today the EV is - give or take - $4bn. Prob lower given cash gen in 2Q. No debt etc.

These are not QLD assets. These are basically all thermal (85%+ of revs). You can underwrite the valn based on coal pxes that completely ignore the new reality in Europe.

Absent horrific cap allocation it just seems incredibly difficult to lose from here.

Meanwhile on actual run-rate earnings - not spot prices - this thing is somewhere b/w a 30-40% yield (I think) and prob retires 20% of the float over next 18mos.

I simply don't get it. It is NOT owned by any real active investors (so no one to choose to sell).

Maybe it just remains cheap, forever. But hard to see how 2018-19 multiples aren't a realistic downside case. We are already there (or much cheaper on div yield) and you get everything else re the current cycle, for free. Stock could double and still be too cheap.

Nothing really ground breaking I know. Am a bit of a tourist on this name in particular but hard to see how its not a structural beneficiary of many trends that appear to have legs (non-Qld; European need for high-quality thermal; etc).

DYODD. GLTA 🙏🙏