The belo straight from Patersons 9th Sept Report. One thing i...

The belo straight from Patersons 9th Sept Report. One thing i noticed in the report was price received per US$/t for 2009 is forecasted to be 77.47 and 64.07 in 2010. I believe with the recent weakness in USD, the forecasted figure in 2010 should be a lot higher (probably around 80-85$ mark)

Dipping the Toe in Acquisition Waters, and into low-CO2

Up to $8.2m for QLD Geothermal
• New Hope has announced that it plans to make an investment of up to $8.2m in Planet Gas Ltd (ASX code PGS) in 2 Tranches. The investment will be up to a maximum of 19.9% in PGS.
• Under Tranche1 NHC has agreed to pay, through a subsidiary called Hueridge, $4.5m for 47.47m shares in PGS at 9.5 cents per share. Tranche2 will be subject to the level of subscriptions under the 1 for 4 rights issue currently being carried out by PGS. Assuming that the
rights are fully subscribed NHC will pay a further $3.7m for 38.94m shares also at 9.5 cents.
• Despite its name PGS is now more focused on geothermal energy in Queensland and NSW and marks perhaps a shift in strategy for NHC away from being solely focused on coal-based energy towards inclusion of some low-carbon energy.
• This is small potatoes for a company with $2.6b in cash at last report (we estimate that as at 31 July cash was $2.7b), amounting to only 1cps. We suspect that there will be more acquisitions to come and have earlier speculated on possible targets being companies like CCD and AQA. Both of those have recently attracted Indian and Chinese investors, respectively, and with the move towards geothermal by NHC, we feel now that the field of possible targets is less obvious. At current interest rates, almost any acquisition would likely be earnings accretive.
• In its latest Quarterly Production report, NHC reported a record annual saleable production for FY09 of 5.14Mt and record sales of 4.97Mt, increases of 15% and 12% respectively compared to the previous year. We expect a similar result in the current year.
• Our valuation has increased by 6cps after ascribing some value to NHC’s early stage exploration resources and our total NPV is $4.82.

If one strips out the cash and AOE shares, earnings from New
Acland are still trading at only about 8x PE. Value is further underpinned by the expected dividend due in November which we estimate to be 83cps, or a 16% yield. Accordingly we retain our BUY recommendation with a price target of $4.80 per share