Banpu Shares Stall at the 20 Baht Level as Global Price of Coal Cools Down Following China Relaxing Coal Mining Curbs

Witawat (Ed) Wijaranakula, Ph.D.
Mon Jan 30, 2017

Banpu Public Company Limited (SET:BANPU) is one of the largest coal miners in Southeast Asia. It owns stakes in more than 20 coal assets around the world, including Laos, Indonesia, China, Australia and Mongolia, with total reserves of 756.50 million tones, as of March 31, 2016. The company operates open-pit and underground coal mines, as well as coal-fired power plants. 

Banpu controls a roughly 15% stake in Ratchaburi Electricity Generating Holding (RATCH), which was spun off from state-owned electricity giant Electricity Generating Authority of Thailand (EGAT), and Lao Holding State Enterprise (LHSE), a state-owned enterprise of Lao PDR. The company spun off its power unit into a separate publicly traded company, Banpu Power PCL (SET:BPP), in late October 2016, which a 78.71% stake is owned by Banpu PCL.

In addition, according to its long-term corporate strategy, Banpu is exploring renewal energy opportunities, including bioenergy, wind power and solar energy. The company is aiming to raise solar investments in Japan and is looking for opportunities to invest in other renewable power projects in China and Indonesia.

Banpu said on November 10 that its revenues for the third-quarter 2016, ending September 30, 2016, were U.S. $586 million, or 20,410 billion baht, compared to U.S. $598 million during the same period the previous year. The company posted a net profit of U.S. $2.01 million, or U.S. $0.000 per share, for the third-quarter 2016, compared to a loss of U.S. $0.001 per share for the third-quarter 2015, due to the continuing decline in global coal prices. 

In the company press release, the company blamed weak sales on a decrease in the coal selling price, which was U.S. $50.73 per tonne, compared to U.S. $53.84 per tonne during the same period the previous year. About 90% of Banpu total revenues came from its coal business. 

From our technical viewpoint, BANPU shares broke out a descending broadening triangle chart pattern in October and are bumping into a long-term trendline resistance near the 20 baht level. A bullish inverted triangle has emerged with a base at 20.50 baht. The stock could break out if the coal price continues to climb, although the company didn't make much profit from the rising global coal price during the third-quarter.

Global coal prices (Australian) have been on the rise from U.S. $53.4 per tonne in January 2016 to U.S. $107.1 per tonne in November, a level not seen since March 2012, after the Chinese government closed thousands of coal mines to reduce its production capacity, as part of plans to prop up coal prices. Investors may want to keep an eye on China, as coal prices could drop if China reverses its course on coal mining restrictions if the coal price continues to skyrocket.

According to the Financial Times, the consensus amongst 20 polled investment analysts covering BANPU gave the company an Outperform rating, with the median 12-month price target of 23.00 baht per share, as of January 28.

Disclosure: No position and no recommendation.


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