One broker has had some optimistic words to say about one particular sector. The brokerage outfit Saxo has suggested that S&P/ASX 200 Index (ASX: XJO) energy shares may have many years of strong profit generation to go. There are some non-ASX 200 shares that are also benefiting.
One of the main global impacts of Russia's invasion of Ukraine has been the significant increase in energy prices. Before 2022, Russia was one of the main global exporters of commodities like coal, gas, and oil.
With Western nations avoiding Russian commodities where possible, it has pushed up the demand and price for non-Russian resources.
Australian coal producers are seeing coal prices jump. However, some investors may be wondering whether the strength for energy prices will have a short life.
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Energy prices could stay stronger for longer
Saxo Bank's head of direct sales David Harvie said:
Thematically and systemically, the greenification of our globe has a long way to go. It's probably got decades to go. Or at least the foreseeable future, until our energy requirements are satisfied in what you could argue is an ESG way, and or greener way, and or a lack of fossil fuel inputs way. And we've been saying that as a house pre-Ukraine. We've been saying that as a house, pre-inflation.
We don't think it's going anywhere. It's only been exacerbated by Ukraine. It will only be exacerbated by a very cold winter in Deutschland and all the other places up there. So, I think if I were an investor, it would be an area I'd be looking at.
There have been some big gains with ASX 200 energy shares, including coal producers.
For example, since the beginning of 2022, the New Hope Corporation Limited (ASX: NHC) share price has gone up 112%. The Whitehaven Coal Ltd (ASX: WHC) share price has risen by 167%.
As reported by my colleague Aaron Teboneras, another factor helping coal could be the recent International Energy Agency report which anticipates that "global coal demand will return to its all-time high this year. This is being driven by higher natural gas prices, which have intensified gas-to-coal switching in many countries".
Whitehaven expects big profit
Whitehaven recently pointed out that coal prices set a new record during the quarter for the three months to June 2022 and "continue to be well supported". Whitehaven is expecting to report FY22 earnings before interest, tax, depreciation, and amortisation (EBITDA) of $3 billion, up from $0.2 billion in FY21.
The broker Macquarie cautions that the strength of the coal price will determine how well (or not) Whitehaven can do. It's expecting Whitehaven's dividend yield to be 6.8% in FY22 and 11.5% in FY23. That's despite the huge gain of the Whitehaven share price.
