The New Hope Corporation Limited (ASX: NHC) share price has been on fire this year.
Since the start of the year, the coal miner's shares have rocketed 145% higher.
Image source: Getty Images
Can the New Hope share price keep rising?
The good news for investors is that it may not be too late to snap up New Hope's shares.
According to a note out of Morgans, its analysts have retained their add rating with a slightly trimmed price target of $6.80.
Based on the current New Hope share price of $5.68, this implies potential upside of approximately 20% for investors.
What did the broker say?
While Morgans was a touch disappointed with New Hope's first quarter update, it remains positive and believes the market is undervaluing its shares. Particularly given that Acland 3 cash flows are not far away from being generated. The broker commented:
1Q (unaudited) EBITDA missed our forecast due mainly to a planned 3 week CHPP shutdown at Bengalla, reducing quality and price realisations temporarily. We think the market under-appreciates Acland 3 cash flows now only 12 months away.
Its analysts also like the company due to its dividends. In fact, Morgans believes a yield of 20% is possible based on current prices. It said:
We forecast accumulation of $1.4bn of net cash by end FY23 pre dividends and buybacks. If we exclude $250m as a balance sheet buffer then plausibly +$1.15bn ($1.22ps) is available for distribution via the announced buyback (up to $300m) and dividends. We think a forecast $1.00ps FY23 dividend forecast is fair, but of course will rely on actual earnings and the balance between actual pricing, NHC's view on value and therefore percentage of the buy-back actually executed.
Based on its forecast for a $1.00 per share fully franked dividend in FY 2023, this equates a 17.6% yield. And if you're able to put those franking credits to use, the gross yield lifts beyond 20%.
Morgans concluded:
We think that NHC can re-rate on: 1) abatement of abnormal selling post notes conversion; 2) recognition of approaching Acland 3 cashflow; 3) ongoing coal price resilience/ strength; and 4) clear capital management upside.
