The New Hope Corporation Limited (ASX: NHC) share price has risen by close to 60% in 2022. Could the coal miner keep going up?
New Hope is one of the largest coal miners in Australia. It currently has a market capitalisation of more than $3 billion according to the ASX.
What has happened to the New Hope share price?
A couple of months ago the business announced its FY22 half-year result.
With that result, it disclosed that the average sales price achieved at 31 January 2022 was A$192.38 per tonne. That represented an increase of 147% compared to a year ago. The closing realised price for the reporting period was A$236.66 per tonne.
The miner reported underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $554.4 million, which was a rise of 583%.
It generated $330.4 million, which compares to a loss of $55.4 million in the prior corresponding period.
The CEO of New Hope, Rob Bishop, said that the company is "well-positioned to continue generating strong, sustainable shareholder returns, with demand for high-quality, lower-emissions thermal coal expected to remain robust in the short to medium term as supply remains constrained."
Mr Bishop pointed to "strong demand and lower than normal stock levels held by customers" as reasons for why the thermal coal price has been pushed well above the long-term average. New Hope said that its forward sales book will support "robust returns".
The business grew its interim dividend from 4 cents to 17 cents, while also declaring a 13 cents per share special dividend.
Is the New Hope share price an opportunity?
According to reporting by the Australian Financial Review, Merlon Capital Partners lead portfolio manager Neil Margolis thought that the New Hope share price was attractive in 2020.
Mr Margolis points out that despite the large rise of New Hope, it is still on a cash flow yield "well north" of 50%. However, the fund manager doesn't think a US$300 per tonne spot price will be maintained. For that reason, Merlon has been taking some profits.
However, Mr Margolis does still see value in the business, stating:
Being screened out by many large institutional investors on ESG is a reason it still offers value. We favour active ownership over divestment and have engaged constructively with the board indicating our preference for existing mines over expansion, responsible site remediation and the return of all surplus cash-flows and franking credits to shareholders, rather than pursuing capital destructive growth projects and acquisitions.
Expectations for FY22
The forecast on Commsec is that New Hope will generate $1.04 of earnings per share (EPS) and pay an annual dividend of 73 cents per share.
That puts the New Hope share price at 3.5x FY22's estimated earnings with an estimated FY22 grossed-up dividend yield of 29%.
