New Hope Corporation Limited

This report is an updated version of the report published on the 23 February 2023 at 3:55 PM GMT+11

Section 1: Company Overview and Fundamentals Insights

1.1 Company Overview

New Hope Corporation Limited (ASX: NHC) is an Australia-based diversified energy company. The principal activities of the Company consist of the development and operation of coal mines, port handling and logistics, agriculture, and oil and gas development and production.

1.2 The Key Positives, Negatives, Investment Highlights, and Risks

1.3 Top 10 Shareholders: The top 10 shareholders together form ~45.61% of the total shareholding. Washington H Soul Pattinson and Company Ltd and Dimensional Fund Advisors, L.P. are holding a maximum stake in the company at ~37.60% and ~1.65%, respectively.

1.4 Key Metrics: The company reported an improvement in return on equity in FY22 to 48.4% compared to 4.6% in FY21. Further, the asset turnover ratio increased to 0.82x in FY22 relative to 0.39x in FY21. Below is captured the trend of the EBITDA margin and gross margin:

Section 2: Business Updates, Financial and Operational Highlights

2.1 Recent Updates:

2.2 Results Highlights of 2QFY23: The company informed that a part of its on-market share buy-back plan, which was started on November 18 2022, led to the buyback of 5.7mn ordinary shares for a total value of AUD 31mn. Further, on 21 December 2022, the company informed the successful completion of a reverse bookbuild to repurchase AUD 75mn of the principal amount of 2.75% of Senior Convertible Notes (due 2026).

2.3 Growth Strategy: The company’s investment in Malabar aligns with its strategy to invest in low-cost coal assets with long-life approvals. Further, the acquisition of Malabar Resource Limited helps diversify the company’s portfolio by providing exposure to metallurgical coal mined by low-impact underground methods.

2.4 Dividend History: The company declared a final FY22 dividend of AU 56 cents per share, fully franked which was paid to shareholders leading toa total amount of AUD 490mn. The management remains focused on returning funds to shareholders through dividend both ordinary and special and ensure increase in value of shareholders.

Section 3: Key Risks and Outlook:

Section 4: Stock Recommendation Summary

4.1 Price Performance and Technical Summary

The stock has witnessed a decline of ~0.74% in 3 months, and over the last 6 months, it has increased by ~11.14%. The stock has a 52-week low and 52-week high of AUD 2.430 and AUD 7.465, respectively and is currently trading slightly above the average of a 52-week high-low average.

4.2 Fundamental Valuation

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 23 February 2023. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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