Alliance Resource Partners: Strong Buy At P/FCF Of 5.6x And Dividend Yield Of 14%

seekingalpha03-10

Alliance Resource Partners, L.P. is the largest coal producer in the eastern U.S. with seven underground coal mining complexes.The company also has some involvement in oil & gas basins and energy ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2418817839?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1317407382/image_1317407382.jpg","is_english":true,"pubTime":"2024-03-10 22:36","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2418817839","market":"fut","top_or_hot":-1,"title":"Alliance Resource Partners: Strong Buy At P/FCF Of 5.6x And Dividend Yield Of 14%","media":"seekingalpha","content":"<div>\n<p>Alliance Resource Partners, L.P. is the largest coal producer in the eastern U.S. with seven underground coal mining complexes.The company also has some involvement in oil & gas basins and energy ...</p>\n\n<a href=\"https://seekingalpha.com/article/4677234-alliance-resource-partners-strong-buy-pfcf-5-6x-dividend-yield-14-percent\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Alliance Resource Partners: Strong Buy At P/FCF Of 5.6x And Dividend Yield Of 14%</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAlliance Resource Partners: Strong Buy At P/FCF Of 5.6x And Dividend Yield Of 14%\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-03-10 22:36 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4677234-alliance-resource-partners-strong-buy-pfcf-5-6x-dividend-yield-14-percent><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Alliance Resource Partners, L.P. is the largest coal producer in the eastern U.S. with seven underground coal mining complexes.The company also has some involvement in oil & gas basins and energy ...</p>\n\n<a href=\"https://seekingalpha.com/article/4677234-alliance-resource-partners-strong-buy-pfcf-5-6x-dividend-yield-14-percent\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4156","symbol_name":"煤与消费用燃料","start_time":0,"source_url":"https://seekingalpha.com/article/4677234-alliance-resource-partners-strong-buy-pfcf-5-6x-dividend-yield-14-percent","article_id":"2418817839","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1317407382/image_1317407382.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2418817839","pubTimestamp":1710081381,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Alliance Resource Partners, L.P. is the largest coal producer in the eastern U.S. with seven underground coal mining complexes.The company also has some involvement in oil & gas basins and energy infr","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4156":"煤与消费用燃料","QSD.SI":"Resources Gbl","BK6027":"贸易公司与经销商","BK6522":"化石燃料股","ARLP":"Alliance Resource Partners","BK4211":"区域性银行","BK4590":"PTP","FCF":"第一联邦金融"},"translate_title":"Alliance Resource Partners：市盈率为5.6倍、股息收益率为14%的强劲买入","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ARLP":1,"US7Y.BOND":1,"US6M.BOND":1,"US5Y.BOND":1,"US3Y.BOND":1,"US30Y.BOND":1,"US2Y.BOND":1,"US12M.BOND":1,"US10Y.BOND":1,"FCF":1,"QSD.SI":0.9,"US912797GW17.BOND":0.6,"US912797GX99.BOND":0.6,"US912797HE00.BOND":0.6,"US912797HG57.BOND":0.6,"US912797HH31.BOND":0.6,"US912797GQ49.BOND":0.6,"US912797GL51.BOND":0.6,"US912797GK78.BOND":0.6,"US912797GB79.BOND":0.6,"US912797FS14.BOND":0.6,"US912797FH58.BOND":0.6,"US912796CX52.BOND":0.6},"content_text":"Alliance Resource Partners, L.P. is the largest coal producer in the eastern U.S. with seven underground coal mining complexes.The company also has some involvement in oil & gas basins and energy infrastructure joint ventures, but this is not a significant part of its business.The investment case for ARLP is based on its low valuations and strong fundamentals, with a P/FCF ratio of 5.6x.In this article I elaborate on the key reasons why I consider this ARLP a strong buy.   Schroptschop Alliance Resource Partners, L.P. (NASDAQ:ARLP) is a master limited partnership operating primarily in the coal space. It has seven underground coal mining complexes, which position ARLP as the largest coal producer in the eastern U.S. There is also a component of mineral and royalty interests in strategic oil & gas basins as well as some cash flows from energy infrastructure joint ventures, but in the grand scheme of things all of this plays an immaterial role in ARLP's business. The overall investment case here is purely driven by the depressed valuations and sound fundamentals. For example, on a P/FCF basis, ARLP trades at 5.6x, which is extremely low. Typically, such levels are associated with businesses that are either heavily indebted or approaching financial difficulties. Ycharts Similarly, if we look at the other commonly used valuation multiples, we will notice that ARLP is indeed cheap across the board (including compared to the sector median). Seeking Alpha Yet, at the same time what we can notice in the P/FCF dynamics is that being this cheap is not that uncommon for ARLP. There could be many reasons behind this, but the structural ones are the following:  ARLP's exposure on coal, which is sooner or later set to be phased out, thus setting an implied limit on future cash generation. Constant uncertainty that is associated with regulatory risk, where there is, for example, a probability of suffering from an incremental tax increase or a complete shutdown of a specific mine. No long-term coal sales agreements, which exposes ARLP to both price volatility risk and, in the worst case, risk of not being able to find sales channels.  So, when thinking of ARLP's multiple, I do not base my investment thesis on potential multiple expansion. Instead, I view P/FCF of 5.6x as a solid entry point from which to capture future distributions to shareholders either via dividends or share buybacks. Let me know dissect the fundamentals and walk you through the key items why I consider ARLP an attractive deep value play with the returns coming from relatively protected cash generation. Thesis Historically and also in the context of 2024 estimated volumes, ARLP relies mostly on domestic sales, which could be considered an advantage. Given ARLP's 50 year track record of selling coal to local energy producers, the risk of not finding a customer is lower than for a coal producer, which focuses more on international markets and has likely weaker ties with the relevant customer base. Domestic sales also brings an advantage in the form of mitigated FX risk and savings on logistics, which is becoming increasingly more expensive as ports impose higher port dues for pollutive products. The figure below depicts this story nicely, where ARLP has yet again managed to secure the lion's share of its production by signing ~ 1-year spot agreements with primarily domestic offtakers. ARLP Investor Presentation February 2024 Now, as described above, the Oil & Gas Royalty segment currently accounts for a relatively tiny chunk of total EBITDA generation, but there are some positive takeaways that investors should factor into their assessments:  ARLP is actively allocating parts of its undistributed cash flows into this segment, which over time should accumulate to something more tangible in terms of the underlying value creation. The investments so far have been very enticing, providing high EBITDA both from the absolute and margin level. As this segment expands, it is highly likely that ARLP will experience a positive uplift in the multiple.  ARLP Investor Presentation February 2024 For a business like ARLP, which operates in an environment of price uncertainty due to no long-term contracts as well as considering the uncertainty stemming from the regulators (policy makers), it is critical to carry a sound balance sheet. The lower the debt, the lower the financing costs, which per definition are fixed cash outflows that could become relatively sizeable in case, for instance, coal prices plunge, consuming a notable piece of ARLP top-line. ARLP Investor Presentation February 2024 Luckily, ARLP's financial profile is sound with quite insignificant debt load assumed on the books. Net debt to EBITDA of 0.31x could be easily deemed very healthy, imposing no meaningful pressure on the free cash flows. In addition, the maturity profile is also favorable as there is no need to refinance borrowings this year, which gives ARLP sufficient time to optimize the 2025 refinancing event. Given that in 2023, ARLP reduced its debt by ~ $22.9 million, I would expect that $21 million maturities will also be paid down. The comment by Cary. P Marshall - SVP & CFO in the recent earnings call sent a positive signal at this end: Next, we remain focused on continuing to improve our balance sheet, maintaining flexibility and strong liquidity. We expect to retire the $285 million outstanding on our senior notes periodically throughout the balance of 2024 using a combination of operating cash flows and a number of attractive financing options currently available to us, including increases to our existing facilities, equipment financing, and utilizing the collateral value of our high quality and unencumbered royalty assets, all of which are at various stages of execution today. The bottom line All in all, investors have to recognize that there is a reason why ARLP trades at this low multiple, and that going long just because of the potential multiple expansion might be quite risky bet. The secular headwinds such as the increasing presence of regulatory risk and a direct exposure to market (coal price) risk will always impose a significant downward pressure on ARLP stock price. In ARLP's investors can enjoy two avenues of strong total return performance. First, over the medium-term, investors should benefit from ARLP's FCF distributions that are already now tangible due to compelling entry point (e.g., dividend yield of 14% due to low multiple in combination with sound cash generation). Second, in the long-term, investors should reap the benefits of ARLP becoming even less leveraged and more diversified as the Management continues to direct parts of the undistributed cash flows into the Oil & Gas Royalty segment. Given the above, for me Alliance Resource Partners, L.P. is a strong buy.  Yet, at the same time, I am not letting this position consume too large a piece of my total portfolio since as it is implied by the valuations, ARLP is subject to risks that are of a reasonable probability and almost impossible to manage, while the reliance on coal is as huge as it is now.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2418817839"}