Wescoal: An exception in a struggling sector
Steely nerved punters might do well to have a closer look at Wescoal — even though ‘smaller’ coal mining operations have fared fairly dismally on the JSE
SA resource ventures are hardly coveted by investors these days — probably for good reason. But let’s assume there are long-term punters who can look past the regulatory minefield, political curve balls, labour hitches and a tricky operating environment. Such steely nerved punters might do well to have a closer look at Wescoal — even though "smaller" coal mining operations have fared fairly dismally on the JSE. There’s quite a lot in Wescoal’s annual report that a rational market should find encouraging. The acquisition-bolstered revenue line looks robust, and operating margins (there are sizeable coal merchant functions) are close to 10%. There are strong cash flows: R359m from operating activities and a net R213m (equal to 82c or 48c a share respectively.) This underpins Wescoal’s determined dividend policy. The company also has a solid track record of delivering on its promises. In all, there is little to support the market rating on Wescoal — a dismissive earnings multiple usual...
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