Paringa Resources (NASDAQ: PNRL) operates the low cost, high quality Poplar Grove Mine, part of the Buck Creek Complex located in the Illinois Coal Basin in western Kentucky. Roth Capital reiterated its buy rating of PNRL in June, with a price target of $33 per share.
Key Highlights:
- Poplar Grove mine advancing toward steady state production
- Existing contracts provide margin stability
- An under the radar opportunity
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What’s Next: Based on current estimates, PNRL could generate approximately $20 million in free cash flow next year, and the company’s pricing power and steadily increasing production should underpin free cash flow generation. Currently, the company trades for less than 2x Roth Capital’s 2020 cash flow estimate.
The Company is projecting $31 million in revenue in 2019 ($2 million EBITDA), and in 2020 $86 million ($16 million EBITDA). Almost 100% of first two years’ production has been sold, and about 60% of the first 5 years’ production, making for very secure medium-term cash flow. The Company has $21 million in cash and 9 million shares out (6 million in float). The company’s enterprise value is $55 million, and its EV/EBITDA ratio is 1.9x, substantially below its main comp, Alliance Resource Partners (NASDAQ: ARLP).
Disclosure
Paringa Resources Limited (NASDAQ: PNRL) is a client of RedChip Companies, Inc. PNRL agreed to pay RedChip Companies, Inc., a monthly cash fee for RedChip investor awareness services.
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