RE: The Coal business & CFYes indeed do the math....200 million in revenues IS NOT Cash Flow, Herb...You have to deduct the expenses from your revenue calculation to get to CF...
Based on a 1 billion dollar market cap revenues (your figure) to capitalization are 5:1, Cash flow (what's left after expenses) relative to capitalization would be in the area of 8-10:1 capitalization.
You reference BTU....1.5 revenues to capitalization on a trailing 12 month basis, analysts estimates for 2009 put the Revs to Cap at a 1:1 ration....the hoped for numbers for SGQ are prospective 12 month numbers and are five times the estimates for BTU.
Earnings estimates for 2009 for BTU are such that their current foreward PE to earnings, not CF is 4...Times earnings by about two for cash flow and you have an 8 multiple...$120 million in cash flow for SGQ, based on 60% operating profit margin times 8 equals the current valuation of one billion dollars.
My conclusion is that SGQ's price fully reflects 2009 revenues and CF...It does not reflect enhanced recource estimates, which if developed prior to a (imminent?) HK listing, coming itself after a settling out of the markets, probably early next year, would give SGQ a lift. In retrospect over $12 SGQ was overvalued relative to its earnings power 12-18 months out, and in this envioronment only a major resource add and an improved market for resource stocks is going to get it back to that $12 price point.
It doesn't help that the Mongolian government continues to fiddle and avoid the issue that profit incentive has to exist for the investment of capital in IVN/RIO's case. Resolution of that matter is now another 6 months out as yet another study group has been organized. SGQ by association with IVN is endangered by the Mongolian government's dragging of their heels and former communist state mentality...
Mind you I am still holding my somewhat reduced SGQ position. One can't deny that one of the last things to be reduced in a recession will be Chinese electricity demand. Resource stocks that can deliver I am figuring will be big winner once recovery is seen coming...Maybe 6 months, however