Whitehaven Coal Analysis
Business Valuation Group Project Report
Monash University, Caulfield Campus
AFF5130: Financial Statement Analysis and Business Valuation, Semester
Contents
Introduction
Section A: Capital Market Analysis o Share Ownership o Share Trading o Bid/ask Spread, 52 Weeks Hi/Low o News and disclosure analysis o Overall liquidity and information environment
Section B: Business Analysis o Macroeconomic Analysis o Industry Analysis – Porter’s 5 forces o Business Strategy Analysis
Section C: Management quality and corporate governance analysis o Management quality o Corporate Governance Analysis
Section D: Accrual Quality o Discretionary accrual quality o Earnings persistence
Introduction
Whitehaven Coal Limited® (WHC:AX) operates predominantly out of the Gunnedah basin in Eastern
Central NSW – the basin being one of the largest underground coal seems in NSW. WHC began as very much a local operation in 1999 but by its initial listing on the ASX in 2007 had grown to be a serious player in the Australian mining scene and by 2009 had become one of the biggest and fastest growing coal miners in Australia with 5 large open cut mines in the Gunnedah region of NSW – conveniently close to Australia’s largest coal port, Newcastle.
This is part 1 of a report that will assess the valuation of the company from the view of a potential takeover. This is especially relevant at the moment with the historically low P/E ratios in the mining industry at the moment meaning a potential bargain depending on our results in part 2 of the report. Another view of the current state of the company and indeed the industry may be that the current drop in demand growth for coal and drop in commodity prices across the board may justify the current low share price.
The company is relatively new having been listed on the ASX in 2007. Below is share price relative to the overall market from 2007-2013, showing huge growth in share price initially which has
Monash University, Caulfield Campus
AFF5130: Financial Statement Analysis and Business Valuation, Semester
Contents
Introduction
Section A: Capital Market Analysis o Share Ownership o Share Trading o Bid/ask Spread, 52 Weeks Hi/Low o News and disclosure analysis o Overall liquidity and information environment
Section B: Business Analysis o Macroeconomic Analysis o Industry Analysis – Porter’s 5 forces o Business Strategy Analysis
Section C: Management quality and corporate governance analysis o Management quality o Corporate Governance Analysis
Section D: Accrual Quality o Discretionary accrual quality o Earnings persistence
Introduction
Whitehaven Coal Limited® (WHC:AX) operates predominantly out of the Gunnedah basin in Eastern
Central NSW – the basin being one of the largest underground coal seems in NSW. WHC began as very much a local operation in 1999 but by its initial listing on the ASX in 2007 had grown to be a serious player in the Australian mining scene and by 2009 had become one of the biggest and fastest growing coal miners in Australia with 5 large open cut mines in the Gunnedah region of NSW – conveniently close to Australia’s largest coal port, Newcastle.
This is part 1 of a report that will assess the valuation of the company from the view of a potential takeover. This is especially relevant at the moment with the historically low P/E ratios in the mining industry at the moment meaning a potential bargain depending on our results in part 2 of the report. Another view of the current state of the company and indeed the industry may be that the current drop in demand growth for coal and drop in commodity prices across the board may justify the current low share price.
The company is relatively new having been listed on the ASX in 2007. Below is share price relative to the overall market from 2007-2013, showing huge growth in share price initially which has