FBR Capital: Assessing the Short-Term Weakness and Long-Term Benefits from the Japanese Disaster
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Price: $27.57 +2.64%
Rating Summary:
7 Buy, 12 Hold, 7 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
7 Buy, 12 Hold, 7 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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FBR Capital: Assessing the Short-Term Weakness and Long-Term Benefits from the Japanese Disaster
FBR analyst says, "While the disaster is still ongoing, and our hopes and prayers are with the Japanese people, we provide an initial assessment to the metals and mining space that could increase global steel, iron ore, and met coal demand by up to 1% per year over the next two to three years. There has been a nuclear renaissance, with 64.4 GWs of new nuclear plants under construction and 609 GWs under consideration. The politicians are currently debating how much of this will be allowed to be completed, which could accelerate steam coal demand from 4% to as high as 6% per annum by 2015–2017, offsetting the global warming debate. For example, China is expected to announce a formal five-year plan, which lowers its new coal-fired percentage to 70%, from about 85% by 2016, using a higher percentage of nuclear and renewables. While this event is tragic, it highlights the risk with nuclear and the benefits of keeping fossil fuels as a high percentage of the grid. Our coal stocks have pulled back nicely off their highs, tied to the Australian rains and slowing China, and currently trade at 6.4x, 5.0x, and 4.6x our 2011–2013 EV/EBITDA, or a 31% upside to our current price targets. We would expect 2012 met coal and iron ore benefits to accrue to more so for Peabody Energy (NYSE: BTU), Cliffs Natural Resources (NYSE: CLF), and Walters Energy (Western Coal acquisition) (NYSE: WLT), based on proximity to Asia, and secondary benefits to CONSOL Energy (NYSE: CNX), Alpha Natural Resources (NYSE: ANR), Patriot Coal (NYSE: PCX), Arch Coal (NYSE: ACI), and Natural Resource Partners (NYSE: NRP)."
FBR analyst says, "While the disaster is still ongoing, and our hopes and prayers are with the Japanese people, we provide an initial assessment to the metals and mining space that could increase global steel, iron ore, and met coal demand by up to 1% per year over the next two to three years. There has been a nuclear renaissance, with 64.4 GWs of new nuclear plants under construction and 609 GWs under consideration. The politicians are currently debating how much of this will be allowed to be completed, which could accelerate steam coal demand from 4% to as high as 6% per annum by 2015–2017, offsetting the global warming debate. For example, China is expected to announce a formal five-year plan, which lowers its new coal-fired percentage to 70%, from about 85% by 2016, using a higher percentage of nuclear and renewables. While this event is tragic, it highlights the risk with nuclear and the benefits of keeping fossil fuels as a high percentage of the grid. Our coal stocks have pulled back nicely off their highs, tied to the Australian rains and slowing China, and currently trade at 6.4x, 5.0x, and 4.6x our 2011–2013 EV/EBITDA, or a 31% upside to our current price targets. We would expect 2012 met coal and iron ore benefits to accrue to more so for Peabody Energy (NYSE: BTU), Cliffs Natural Resources (NYSE: CLF), and Walters Energy (Western Coal acquisition) (NYSE: WLT), based on proximity to Asia, and secondary benefits to CONSOL Energy (NYSE: CNX), Alpha Natural Resources (NYSE: ANR), Patriot Coal (NYSE: PCX), Arch Coal (NYSE: ACI), and Natural Resource Partners (NYSE: NRP)."
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