Thungela’s monster dividends, can EasyVSTRs expect more?

In EasyResearch we touched base on the global dependence shift and how it has created a conducive environment for companies, mainly positioning them for future earnings growth as the global economy fights the high cost of living.

What is the global dependence shift?

A shift where the global economy is less dependent on the West. This, for investors, may create a volatile environment within the short to medium term.

EasyZAR

Thungela Resources Limited (TGA)

For listed coal companies, especially in South Africa, this has brought about significant earnings, bringing the companies into the spotlight. Thungela Resources is among the companies which grabbed the attention of investors following the first payout since their listing. 

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On EasyEquities, Thungela Resources has over 53k investors and was among the most bought stocks in recent weeks. Since announcing its monster dividend, the company has rallied from around R280 to R358 as of writing.
Is this an opportunity for income from coal? According to the company's recent financials, despite the 17% rise in operating costs in the first half of 2022, profits from operations grew by over 4000% to R9.6 billion (R67.23 per share) as a result of the coal prices. This means the company is trading at a PE ratio of 5.33x. It may further indicate that the company is undervalued as earnings catch up, given the escalating geographical tension in The West. There’s also the energy embargo against Russia that's set to kick in soon, which may push demand and energy prices even higher.

As a result of the South African railway issues, saleable production in 2022 FY was 13.0Mt to 13.6Mt. Guidance for Free on Board 'FOB' costs for the period (which refers to costs related to ownership and exportation per tonne of coal) were revised to R1,025 and R1,065 per tonne (R885 and R915 per tonne excluding royalties).

R60 per share, or R8.2 billion, is the expected dividend, which is 92% of the adjusted operating free cash. The last trading date is 20 September and the payment date 26 September 2022. R500 million (2021: R273 million) has been set aside for the SACO Employee Trust and Nkulo Community Partnership Trust.

Check the full dividends update here or below

Can investors expect another dividend payout? With a dividend policy that stands with a payout of 30%, this may support future earnings distribution to shareholders.

The company says it expects historical seasonality headwinds for the second quarter (FY) to take it out of its capital expenditure (CAPEX) guidance range of between R1.7 billion and R2.0 billion, after spending R568 million in the first quarter. To continue bringing value, the company board approved the Elders production project, a replacement for the Goedehoop colliery that's scheduled to be solar-powered while maximising the quality of coal.

By the end of H1 FY22, Thungela was in a net cash position of R14 billion, compared to last year's R3 billion.

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Informed decision

A point to consider is that the stock will drop by around R60 on the ex-dividend date, 21 September 2022. This is because, on the day, the stock will be trading without dividends; depending on the environment for coal, as more countries continue to import coal from South Africa in an attempt to combat rising energy prices. This may further become an opportunity for compounded returns as the company continues to harvest the coal demand and commodity prices that may see a further rise as geopolitics take a toll on the global economy.

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Read: Companies keeping lights on for EasyVSTRs and Consumers

Sources – EasyResearch, JSE Sens, Thungela Resources.

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