October 23, 2018 Read More →

Australian stock market responds weakly to coal company IPO

Reuters:

Coronado Global Resources, Australia’s biggest coal mining IPO since 2012, fell as much as 8.5 percent below its float price on the first day of trading on Tuesday, even after being priced at the bottom end of the offered range. Coronado’s shares debuted at A$3.80, 5 percent below the issue price of A$4.00 and fell as low as A$3.66 in early trading on the Australian stock exchange.

Local fund managers shunned the offering on the view that Coronado’s private equity owner, The Energy & Minerals Group (EMG), was selling when coking coal prices were primed to fall on declining demand from China.

“I don’t think we can forecast the coking coal price, so it’s tough to buy something at peak earnings,” said Hugh Dive, chief investment officer of Atlas Funds Management.

Coronado mainly produces coking coal used in steel-making, with an annual output of 8.2 million tonnes from three U.S. mines and 8.5 million tonnes from the Curragh mine in Australia, which it bought from Wesfarmers Ltd for A$700 million last December.

Dive said another factor that put him off was that Coronado had bought the Curragh mine on an earnings multiple of 1.5, yet was floating the same asset, which makes up about half the company’s valuation, on a multiple of 4 to 4.5. “They have obviously made a lot of money (on Curragh),” said another Sydney-based fund manager, who did not buy shares in the initial public offering.

More: Coronado coal float flops on Australian market debut

 

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