Up 37.5% in 2 months, and this share is still running thanks to this catalyst

by , 26 June 2018
Up 37.5% in 2 months, and this share is still running thanks to this catalyst
Wescoal's share price is up from 160cps on 19 April 2018, to 220c today.

That's a 37.5% increase in two months!

And I'm expecting more upside.

You see, as I recently told my Red Hot Penny Shares readers, Wescoal should hit fourfold production growth in 2018/2018 compared to 2016.

And even though Wescoal is still 19% below its 2017 high, there's more than enough evidence to suggest the share is heading higher.

And it could soar high as R5 - which means it could still more than double!

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The coal price is soaring – and that supports Wescoal’s rise

Wescoal is a coal miner. In 2016, it produced around 1.7 million tons of coal for the year.

Expectations are that its production will reach 8 million tons in 2018/2019.

And with a rising coal price, that’s an even bigger positive for Wescoal.


The coal price is moving in just the right direction for Wescoal!

 
As you can see, the coal price, in rands, is soaring.

This is due to two factors:

Coal price booster #1: Coal demand in Asia is rising

THE Richards Bay Coal Terminal (RBCT) exported a record 76.47 million tons (Mt) of coal during 2017 beating the previous record of 75.38Mt exported in 2015, and is budgeting for another record year during 2018 on the back of soaring export coal prices.

RBCT CEO, Alan Waller, said that Asian customers took 81.6% of the RBCT’s exports during 2017 with India by far the largest customer accounting for 35.76Mt equivalent to 47% of total exports. Pakistan took a further 8.7Mt during the year. Waller expect this demand to increase in 2018.

And even though Wescoal is still 19% below its 2017 high, there’s more than enough evidence to suggest the share is heading higher. And it could soar high as R5 – which means it could still more than double!

Coal price booster #2: The Rand is crashing

Whether it is the end of ‘Ramaphoria’, uncertainty about property rights in SA or the impending recession that might hit us, the rand has taken a beating.

In February this year, the rand was at R11.55. Today it sits at R13.88.

So, if a ton of coal cost $100 – the rand price would’ve seen an increase of 20% just because of the amount the rand has weakened to the dollar.

At this stage, end of July forecasts put the rand to the dollar at R14.80. So, it is entirely possible that the coal price could hit R1554 per ton if the dollar price of coal stays constant. That’s a further 12% upside from here…

With further increases in the export price of coal, I expect that Wescoal will see more growth in its share price.
 
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300% profit growth in the pipeline

On top of all of this, Wescoal is due to announce results soon.

The company should see its earnings per share rise by more than 300%, from 11.6cps in 2017, to 46.5cps this year.

With profit numbers this big, and its share price on 220c, Wescoal has a PE of only 4.73.

Exxaro’s PE sits at 24. So even if Wescoal trades at a 50% discount to that, with a PE of 12, its share price would be 558c or 153% higher than current levels!

 
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Up 37.5% in 2 months, and this share is still running thanks to this catalyst
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