Missouri-based Peabody Energy (BTU) is the world’s largest private sector coal mining company, owning majority interests in more than 30 mines in the U.S. and Australia.
The company enjoys strong leverage to emerging Asian markets via its Australian operations. Of late, it has set up a new office in Singapore, which will serve as the hub for its trading and brokerage activities in Southeast Asia. This will further strengthen Peabody’s access to high-growth seaborne coal markets in the region, especially China and India, which are expected to be the demand drivers in both the near and long terms.
Coal is assumed to be the fastest growing fuel over the next 20 years and China and India will constitute over 50% of that demand growth. Peabody intends to cash on the opportunity leveraging its global platform and low-cost operating base. The opening of a new trading office in Singapore validates that.
Peabody’s size, quality reserves, strong balance sheet, geographic diversity and impressive management are significant competitive advantages. Although the company warrants a higher multiple than its peers, the valuation remains a bit stretched amid all the uncertainties and lack of visible near-term catalysts. Hence, we maintain our Neutral recommendation for the company.
Read the full analyst report on “BTU”
Zacks Investment Research