It's been a ripper year for many of the market's favourite ASX coal shares – and one still looks to be trading at an attractive price, according to one expert.
Stanmore Resources Ltd (ASX: SMR) is an Aussie coal producer with assets in the Bowen and Surat Basins, where it mines metallurgical, known as coking, coal. It recently acquired all interest in what was BHP Mitsui Coal (BMC).
The Stanmore share price has rocketed around 200% since the start of 2022 amid soaring coal prices. It's trading at $2.90 at the time of writing – more than 30% higher than it was this time last month.
Its year-to-date gains are on par with similar surges in S&P/ASX 200 Index (ASX: XJO) coal favourites Whitehaven Coal Ltd (ASX: WHC) and New Hope Corporation Limited (ASX: NHC). They've gained 236% and 150%, respectively, in 2022.
Glenmore Asset Management founder Robert Gregory previously posted a huge win, with a few notable coal shares helping the fund return more than 50%.
Now, the expert is bullish on the future of the smaller ASX coal miner, writing, via Livewire, that he believes it's set to outperform over coming years.
Image source: Getty Images
Could this coal share outperform its ASX 200 peers?
There are many reasons behind Gregory's bullishness on shares in ASX coal miner Stanmore.
The most obvious is its established, producing, and low-cost mines. The expert notes that its low-cost base better positions the company to push through falling coal prices.
On top of that, he notes coking coal prices are lower than their thermal cousins right now. Thus, they might face less volatility in the future. Though, commodity prices are notoriously hard to predict.
The federal government recently tipped thermal coal to average US$333 a tonne in 2022, falling to US$125 a tonne in 2024. Meanwhile, coking coal is expected to fall from around US$400 a tonne this year to US$220 tonne in 2024.
Of course, current high commodity prices mean Stanmore and other ASX coal producers are experiencing huge cash flows right now. Indeed, the company's operating cash flow surpassed US$560 million in the first half.
As a result, Gregory tips its balance sheet to improve, driving it to a net cash position next year.
The expert flagged the ASX coal share's valuation as another positive, writing:
At a stock price of $2.90, [Stanmore] trades on low EV/EBITDA multiples of 2.0-2.5 times in [calendar year 2022-2023], which seems too cheap given the quality of its asset base.
Stanmore isn't the only ASX coal share market experts are tipping will rise.
Experts are divided about the future of the Whitehaven share price, however many are hopeful it could post notable gains. Meanwhile, others believe Yancoal Australia Ltd (ASX: YAL) shares are a value coal buy.
