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Anglo Pacific grows its royalties

The coal price has boosted returns for the royalty company
April 5, 2017

Natural resources royalty company Anglo Pacific (APF) stressed, in these full-year results, its plans to diversify away from coal - particularly its stake in the Kestrel mine in Queensland's Bowen Basin, operated by Rio Tinto (RIO). This hasn't stopped the group from benefiting hugely from both the increase in coking coal prices and an increase in saleable tonnes at Kestrel, which together helped more than double royalty income in 2016 (see table). Sterling weakness also bolstered the group's performance.

IC TIP: Buy at 121p

At 6p, the company's dividend is sitting at the minimum level set at its rebasing 12 months previously, although it has maintained its target of paying dividends worth 65 per cent of adjusted earnings. The dividend is covered 1.6 times on an adjusted basis and, subject to commodity prices, the group will be looking to up payment levels during the course of 2017.

The balance sheet is looking strong, with net debt down below 1 per cent of equity. The group would be debt-free if not for the Denison Mines financing agreement, which is already supplying toll mining revenues.

Analysts at Macquarie are forecasting adjusted post-tax profit of £29.9m, giving adjusted EPS of 17p in 2017 (from £26.4m and 15.6p in 2016).

ANGLO PACIFIC (APF)

ORD PRICE:121pMARKET VALUE:£219m
TOUCH:120-121p12-MONTH HIGH:135pLOW: 61p
DIVIDEND YIELD:5.0%PE RATIO:8
NET ASSET VALUE:116pNET DEBT:£1m

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201215.218.010.710.20
201314.7-52.9-39.010.20
20143.5-42.4-42.18.45
20158.7-30.5-14.17.00
201619.728.315.66.00
% change+127---14

Ex-div: 29 Jun

Payment: 9 Aug