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 Stephen Fry explains what he would say if he was 'confronted by God'
- 2 Venezuela Expo Tattoo 2015: Extreme body art from 'Vampire Woman' to 109mm earlobes
- 3 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 4 Ball pool for adults opens in London
- 5 Rashida Jones speaks out against male-centric porn saying 'women should have sex and feel good about it'
Stephen Fry explains what he would say if he was 'confronted by God'
9 reasons Greece's experiment with the radical left is doomed to failure
Have we reached 'peak food'? Shortages loom as global production rates slow
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
Hard line on immigration could cost Tories the election
iJobs Money & Business
£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...