New Hope Corporation Limited (ASX: NHC) has released its FY19 result to the market, is its share price a buy?
New Hope is an Australian diversified energy business which has been operating from its Queensland base for more than six decades. It has interests and operations across coal mining, exploration, port operation, oil, agriculture and innovative technologies. But, its main operations are currently in coal mining.
New Hope’s FY19 Result
The coal miner reported that its revenue increased by 21% to $1.3 billion thanks to an increased share of coal sales from the Bengalla Joint Venture.
New Hope’s EBITDA (click here to learn what EBITDA means) before regular items rose by 11% to $517 million.
Net profit after tax but before ‘non regular items; increased by 3% to $268 million and net profit after non regular items rose by 41% to $211 million.
In 2018 there was a large impairment on its coal exploration and evaluation assets, and it also recognised a sizeable loss on discontinued operations.
The coal price has been volatile and lower in recent times, but New Hope said that demand for high quality thermal coal remains strong across Asia. New Hope predicts that in most Asian countries, thermal coal will continue to be a significant part of the energy mix for many years, which will be underpinned by new coal fired power plants.
New Hope pointed to the larger stake of Bengalla during FY19 and the increased Bengalla production rate to 10 million tonnes per year as reasons for the ability to generate sustainable long term returns for shareholders, with a focus on low cost operations.
The New Acland Coal Mine Stage 3 Project has not yet been given final approvals, so although its was granted its Environmental Authority in March 2019, it still requires its Mining Leases and Associated Water Licence. That’s why New Hope is making up to 150 workers redundant unless approval is given.
New Hope Dividend
The New Hope Board declined a final dividend of 9 cents per share, up 13% on last year. That brings the full year dividend to 17 cents per share, up 21% on 2018.
Is The New Hope Share Price A Buy?
The New Hope share price has dropped 3% in reaction to the result. New Hope currently offers a fully franked dividend yield of 7%, or 10% with franking credits included.
Coal prices may go up again, or they may not. That’s the trouble with resource businesses – you just don’t know what the commodity price will do. I’d much rather get exposure to New Hope through owning Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) than owning it directly.
Coal is not likely to be a long term growth industry. For growth I’d rather buy the shares revealed FOR FREE in the report below.
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Disclosure: Jaz owns shares of Washington H. Soul Pattinson and Co. at the time of writing, but this could change at any time.
