Came across a company called Alliance Resource Partners LP (ARLP) based in Tulsa. Coal and mineral mining company. Dan, it pays a 14% dividend. Has a ROIC of 26%, FCF yield of 14%. Trading at $19 dollars. If one looks at its price to economic book value (zero terminal growth) its worth a C note.
Anybody heard of this company?
Interesting coal and mining company
Re: Interesting coal and mining company
I looked at it because I think there is an opportunity in coal. Looks like they must have had a miss on earnings or negative forecast because it was down on high volume last week and analysts are pretty neutral. Accordingly I will await someone giving it a thumbs up. there may be a really good reason it's yield is high. Possibly it was just down due to dividend payment on 2/14.
Re: Interesting coal and mining company
It appears Chuck that the last quarter revenues was due to lower prices on coal and slightly higher cap expenses but yoy up 7.5%.
https://investor.arlp.com/investors/press-releases/press-releases/2024/Alliance-Resource-Partners-L.P.-Reports-Record-Full-Year-2023-Revenue-and-Net-Income-Declares-Quarterly-Cash-Distribution-of-0.70-Per-Unit-and-Provides-2024-Guidance/default.aspx
The three analysts on trading view have it as a buy with price targets 25 to 28 dollars/share.
https://investor.arlp.com/investors/press-releases/press-releases/2024/Alliance-Resource-Partners-L.P.-Reports-Record-Full-Year-2023-Revenue-and-Net-Income-Declares-Quarterly-Cash-Distribution-of-0.70-Per-Unit-and-Provides-2024-Guidance/default.aspx
The three analysts on trading view have it as a buy with price targets 25 to 28 dollars/share.
Re: Interesting coal and mining company
I have a holding in ARLP and have had it since early 2022 - got in for an average of c. $14 per share and with dividend drip, my effective cost is now down to c. $10. Its a long term hold for me (approx 20% of my coal holdings). I like the CEO, Joe Craft - worth listening to 2-3 of the confra calls. Some things to comment on/note:
- Its an MLP so you will get a K1.
- Its coal operations are primarily thermal and highly skewed to the US - they have been increasing their export flows, but these are a low % vs other thermal players such as Consol (CEIX).
- They have been growing an Oil & Gas Royalty business over the last 10 years - its now reached c. 15% of ebitda. Expect them to continue to invest in this. They have also "wasted" some $'s in a couple of "transition" related investments - thankfully not too much put into this.
- Majority of debt has been paid off - I think they are down to c. $200m of debt.
- 2023 ebitda of c. $0.9bn vs market cap of $2.5bn.. with very modest maintenance capex. They have been using some of the abundant cash flow from 2022's peak coal pricing to add capacity at a number of their mines - this should finish in 2024, and after that will see very low maintenance capex in 2025 and beyond.
- Majority (I think 90%) of 2024 coal volumes committed at prices consistent with 2023 prices.
- I think dividend is safe this year. If NG stays at <$2 into 2025, the dividend might be under pressure, although as noted above, their capex will be down in 2025.
Why is share price down - most Thermal coal names have tracked down with NG prices because in the US there is certainly switching between NG and coal depending on pricing. ARLP benefits from long term contracts for a lot of their volume. Coal (API2) pricing to Europe has also declined due to Euro TTF gas pricing being down as well. For me, given my low base and fact that I hold in a taxable a/c (due to K1) I am sitting tight. I suspect at some stage, if their multiple remains very low, I could see them spinning out the O&G royalty biz.
Obviously just my own views and not investment advice (I have too many scars from being wrong !!).....
- Its an MLP so you will get a K1.
- Its coal operations are primarily thermal and highly skewed to the US - they have been increasing their export flows, but these are a low % vs other thermal players such as Consol (CEIX).
- They have been growing an Oil & Gas Royalty business over the last 10 years - its now reached c. 15% of ebitda. Expect them to continue to invest in this. They have also "wasted" some $'s in a couple of "transition" related investments - thankfully not too much put into this.
- Majority of debt has been paid off - I think they are down to c. $200m of debt.
- 2023 ebitda of c. $0.9bn vs market cap of $2.5bn.. with very modest maintenance capex. They have been using some of the abundant cash flow from 2022's peak coal pricing to add capacity at a number of their mines - this should finish in 2024, and after that will see very low maintenance capex in 2025 and beyond.
- Majority (I think 90%) of 2024 coal volumes committed at prices consistent with 2023 prices.
- I think dividend is safe this year. If NG stays at <$2 into 2025, the dividend might be under pressure, although as noted above, their capex will be down in 2025.
Why is share price down - most Thermal coal names have tracked down with NG prices because in the US there is certainly switching between NG and coal depending on pricing. ARLP benefits from long term contracts for a lot of their volume. Coal (API2) pricing to Europe has also declined due to Euro TTF gas pricing being down as well. For me, given my low base and fact that I hold in a taxable a/c (due to K1) I am sitting tight. I suspect at some stage, if their multiple remains very low, I could see them spinning out the O&G royalty biz.
Obviously just my own views and not investment advice (I have too many scars from being wrong !!).....
Re: Interesting coal and mining company
Thanks for posting these insights. Makes sense. Sounds like dividends will continue to flow which was a concern. Will take a deeper dive. Again, thanks for taking the time to share the ideas.
Re: Interesting coal and mining company
Thank you JB for your insights.If NG is under 2 bucks in 2025, we are all gonna take a major hit.
Re: Interesting coal and mining company
Agreed Aja !