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Anglo Pacific Group shares rise as Peel Hunt maintains 'buy' rating and lifts target price

Peel Hunt raised its dividend estimate for 2019 after better-than-expected results from the Kestrel and Maracas operations last year
coal
Investments in coking coal and vanadium boosted Anglo's 2018 results

Anglo Pacific Group PLC (LON:APF) shares gained on Tuesday as Peel Hunt maintained a ‘buy’ rating and raised its target price to 213p from 205p after the mining royalty group posted solid 2018 results.

Last week, Anglo reported a 16% rise in total royalty income to £46.1mln for 2018, driven by a 13% rise to £32.6mln in the contribution from Australian coking coal mine Kestrel.

READ: Anglo Pacific's income climbs again thanks to vanadium and coking coal

Pre-tax profits rose to £44.5mln from £11.8mln, reflecting a £22mln positive swing in the value of Kestrel.

The new owners of Kestrel – a consortium of Australian mining financier EMR Capital and Indonesian coal producer Adaro Energy – are targeting a 40% increase in volumes in 2019.

“We assume Kestrel will reach a run rate of 6.7mln tonnes per annum by year end and assume the team will hit 5.9mln tonnes in 2019, still up 24% year-on-year in a very supportive price environment,” Peel Hunt said.

“This, in turn, has driven upgrades to our estimates.”

The broker raised its estimates for 2019 total income by 3% to £63.5mln and for earnings (EBITDA) by 4% to £55.7mln. For 2020, it lifted the total income and EBITDA forecasts by 7% and 9% respectively. 

Elsewhere, the contribution to Anglo’s 2018 results from vanadium group Maracas Menchen almost trebled to £5.9mln as prices for the battery metal and steel additive rocketed.

Due to better-than-expected income from Kestrel and Maracas, Peel Hunt now expects the build-up of a larger cash pile.

“The extra cash flow we believe the group will generate leads us to increase our 2019 estimates for dividend per share to 8.5p from 8.0p,” the broker said.  

Peel Hunt added: “We see deal capacity of over £110mln by mid-2020, suggesting management has capacity to make a significantly larger transaction than it has achieved to date.”

Shares in Anglo rose 1.5% to 169p in morning trading.

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