RJB Mining hits bottom of pit
Friday 16 October 1998
SHARES IN RJB Mining defied gravity on their way up. Now that they are on the way down no-one is prepared to call the bottom. Yesterday they fell another 6p to hit a record low of 79p even though first-half profits, at pounds 44.7m, were at the top end of forecasts.
What did the damage was the bigger than expected dividend cut, from 10p to 3p, allied to uncertainty about whether Britain's biggest coal producer will sign extra supply deals with the electricity generators.
The shares ought to be a buy. At the current price they are trading on an historic multiple of one. Even assuming earnings fall by two-thirds this year, the shares will still be on a forward multiple of just three. The yield, meanwhile, is bigger than the multiple, even supposing the payout for the year is no more than 6p. That points to earnings being insufficient to support any dividend.
RJB's Richard Budge certainly faces challenges. Despite the gas ban, there are enough gas-fired stations in the pipeline to remove another 12 million tonnes of coal demand and Mr Budge will need to work like fury to keep production costs below the prices the generators are likely to offer to buy more coal.
But the long-time bear of the stock, Paribas' Charles Kernot, reckons the current share price cannot be justified by the worst-case scenario where all deep-mined pits are shut. Without any upside from new contracts, he has pencilled in profits of pounds 27m next year, putting the shares on a multiple of six times. Given the market's lack of appetite for RJB, Mr Budge could be forgiven for taking the business private again. Investors should think of buying the shares before he does.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...