Post by
GUNSS on Jan 30, 2023 9:51am
ARLP killing it in coal! 12.5% yield!!
4th qtr. earnings came out about 3 hours ago. (Friday after the close, the Company announced a 40% increase in the distribution on its MLP units...)
Earnings beat nicely, and guidance for CY 2023 looks strong. The average analyst EBITDA estimate before today was ~US$1.2B for CY 2023, that figure will likely rise now. U.S. Coal producer $ARLP is trading at about a 2.5x 2023e Enterprise Value/EBITDA ratio.
Why am I so excited? The units are currently yielding 12.56%! Net debt/2023e EBITDA = ~0.15x, absurdly low. So, a coal company (coal is bad, right?), but nearly zero financial risk as 93-94% of 2023 coal contracts are already signed at fixed prices, and a substantial portion (~60%) of 2024e production is contracted/priced.
One last thing, the Company is expanding more into oil & gas than in coal. Organic internal growth in coal, but acquisitions in oil/gas royalty assets. $ARLP is probably still ~90% coal.
If by 12/31/23 these units are yielding 10.00% instead of 12.56%, the unit price would be $28 and the total return would be 36%.