INVESTMENT THESIS投资评述 This week's Focus Stock of the Week is James River Coal Company (JRCC: $15), which carries Standard & Poor's highest investment recommendation of 5-STARS, or Strong Buy. 本周的“每周焦点股票”是James River Coal Company (JRCC: 15美元),标准普尔给予该股最高的“五星”投资评级(强烈买入)。 Thanks in large part to improved productivity, tighter cost control and rising realized price per ton sold, JRCC has begun what we view as a turnaround and has started to narrow its losses per share over the last three quarters. We believe this trend will continue as supply and demand levels in the global coal market improve over the next six to 12 months, which in turn should support higher coal prices. Production cutbacks, the idling of unprofitable mines and transportation slowdowns due to scheduled summer railroad maintenance will help reduce supply, in our view. 得益于生产率改善、成本控制加强以及每吨销量的实现价格上涨,我们认为JRCC已经进入复苏期,其过往三个季度的亏损已开始收窄。鉴于未来6-12个月全球煤炭市场的供需状况有望好转,应可支持煤价走高,我们相信公司将会保持这种良好势头。在我们看来,由于产量减少、低利润煤矿关闭以及铁路进入夏季的保养期导致运力下降,这些都将减少供应。 We expect demand to increase, as electricity generation expands during the summer burn season and growing Asian economies consume greater amounts of energy and increase their imports. China, for example, has recently become a net importer of coal, driving other Asian countries to search for new suppliers of coal, while India is also expanding its consumption of coal. Domestically, electric utilities have already started to reduce coal stockpiles as consumption increased with a higher number of heating days at the end of winter. 我们预料需求将会上升,因为夏季是用电高峰期,发电量将会增加,而亚洲经济体的能源消费正在不断扩大,带动了进口的增长。以中国为例,近年来中国已经成为煤炭的净进口国,这使得其他亚洲国家不得不另觅新的煤炭供应渠道,与此同时,印度的煤炭消费也在不断扩大。从国内来看,由于消费旺盛,加上冬末的供暖天数增加,电力公用事业的需求已令煤炭库存开始降低。 Under these improving industry conditions, JRCC's 2008 volumes and realized prices will increase, by our calculations, which should drive revenue growth. As the company continues to drive further productivity improvements by closing high-cost mines, reducing the number of outside contract miners, and decreasing turnover and retaining more experienced miners, production cost per ton should decline. We see EBITDA margins expanding and losses per share narrowing due to these actions. 藉助行业状况的好转,我们估计JRCC 2008年的销量与实现价格都将上升,进而推动收入增长。公司透过关闭高成本煤矿、削减外部签约矿工的人数、降低人员流失率和挽留经验更丰富的矿工等措施,致力于进一步改善生产效率,所以每吨生产成本有望降低。考虑到这些措施,我们预料EBITDA利润率可望扩大,每股亏损将会收窄。 A recent refinancing has improved JRCC's liquidity and debt expense, which has helped to alleviate some of the bearish sentiment on the stock, in our view. On February 26, 2007, the company entered into a $35 million revolving credit agreement and a $100 million term credit agreement. After repaying prior revolvers and letters of credit and satisfying bank covenant agreements, JRCC has approximately $34.9 million in available liquidity from this transaction, by our calculation. When combined with the $15.7 million cash on hand, JRCC has nearly $50.6 million in total liquidity, or $3.18 per share. In our view, this should help remove any overhang on the stock resulting from liquidity concerns, and allow the shares to trade closer to peer valuations. 近期的再融资改善了JRCC的流动资金状况和债务开支,我们认为这有助于缓和市场对该股的看空情绪。2007年2月26日,公司签订了一项3,500万美元的循环信贷协议和一份1亿美元的定期信贷协议。在偿还以前的循环贷款和信用证以及履行了银行担保协议后,我们估计JRCC从这项交易中获得了约3,490万美元的可用流动资金,再加上手头现金1,570万美元,JRCC的流动资金总量接近5,060万美元,或每股3.18美元。我们认为,这将有助于消除该股因为流动资金的隐忧而面临的巨大沽压,令股价向同类股的估值水平靠拢。 We also believe JRCC could benefit from future potential industry consolidation as larger producers seek out small to mid-sized producers for their expansion efforts. Many larger competitors have indicated that they may look for producers that have high-quality, long-term reserves but that are also stressed by current pricing conditions relative to their average cash cost of production, have debt or liquidity issues that could limit the speed of their production or expansion or might have cash flow issues. 我们认为JRCC将会从未来潜在的行业整合中获益,因为大型生产商为了扩张之需,都希望兼併中小型生产商。许多规模较大的竞争对手均表示,或会物色符合以下条件的生产商作为目标,即质素出众、拥有长期储量,但因平均现金生产成本与当前的价格状况不成正比而压力重重,受债务或流动资金问题困扰而限制了生产或扩张的步伐,或者是可能存在现金流量问题。 We view JRCC's valuation as compelling, as the stock is trading at nearly a 25% discount to peers on an EV/EBITDA basis, despite the company's substantial high-BTU, low-sulfur reserves that could support 22 years of production based upon current production levels. Additionally, JRCC has a broad customer base of primarily electric utilities, with no customer greater than 10% of sales. Based upon our calculations, we see cash costs per ton declining and cash flow improving over the next two years, which adds to the company's appeal, in our estimation. 我们认为JRCC的估值具吸引力,因为该股的EV/EBITDA较同类股折让近25%,而公司却拥有可观的高BTU、低硫储量,按目前产量计算,足供开采22年。再者,JRCC拥有广泛的客户基础,主要集中在电力公用事业,而公司对单一客户的销售额均不超过总销售额的10%。根据我们的计算,预料未来两年的每吨现金成本将会下降,现金流量有望改善,这更增加了公司的吸引力。 INVESTMENT RISKS 投资风险 Risks to our recommendation and target price, in our view, include lower-than-expected coal prices, productivity declines, increased supply costs, lower-than-expected demand trends and weaker-than-expected U.S. economic activity. Other risks include liabilities and fines associated with potential civil or criminal lawsuits by regulatory bodies or others due to regulatory violations or mine fatalities. 投资建议及目标价的风险包括:煤价低于预期;生产率下滑;供应成本增加;需求势头不如预期;及美国经济较预期疲弱。其他风险有:因违规或煤矿事故遭到监管机构或他人的民事或刑事诉讼,从而招致法律责任及罚款。

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