## Metals v coal v palm, who wins...?

January 20th, 2021

1 minute read

Sales

24 commodity stocks, 4 metals, 5 coal, 5 palm oil... in terms of recent sales growth, metals win with an average +2%, beating the index -7%. Coal is -9% while palm oil has been weakest with -11%. Our forecast average quarterly sales growth is the other way around. Palm wins with growth turning to +12%, coal second, +11%, metals +7%.

Cashflow

All 3 groups now have positive cashflow with metals highest, palm oil the weakest. Only one group, coal has made enough cashflow to pay out capital, to investors, metals is weakest. Lower investment spending will help to increase cashflow & in this case Palm has had the biggest drop in investment spend. Coal slightly lower, Metals spending is still high.

1 minute read

Sales

24 commodity stocks, 4 metals, 5 coal, 5 palm oil... in terms of recent sales growth, metals win with an average +2%, beating the index -7%. Coal is -9% while palm oil has been weakest with -11%. Our forecast average quarterly sales growth is the other way around. Palm wins with growth turning to +12%, coal second, +11%, metals +7%.

Cashflow

All 3 groups now have positive cashflow with metals highest, palm oil the weakest. Only one group, coal has made enough cashflow to pay out capital, to investors, metals is weakest. Lower investment spending will help to increase cashflow & in this case Palm has had the biggest drop in investment spend. Coal slightly lower, Metals spending is still high.

## Metals fastest recent sales growth, coal only one to pay capital, palm oil at just 0.5X assets... which has the most upside?

Balance sheet

As groups, all have negative net cash minus liabilities. Only one stock, INCO is positive. The leverage, net cash to market value is highest for palm at 0.6X, coal is 0.4X while the metals have the lowest leverage, 0.1X. 3 out of the palm oil stocks have a leverage (negative net cash) which is bigger than 1X the market value.

Profit

In terms of profitability, metals enjoy the lowest cash costs ratio, 81%, palm is highest, 85%. Coal & palm costs are higher than five year averages & ratios should improve with higher prices. The tech stocks have cost ratios in the 60% range. It’s crazy that tech should have better margins than materials which they use. This should now reverse.

Value

Average market value is Rp 54 trillion for metals, Rp 27 trillion for coal, only Rp 7.8 trillion for palm. Metals are 2.4X price to assets, coal 1X, palm only 0.5X! The bottom line is how much upside we now see. On average the metals have already beaten our target, while coal has 141% upside, but palm wins with 154%.

As groups, all have negative net cash minus liabilities. Only one stock, INCO is positive. The leverage, net cash to market value is highest for palm at 0.6X, coal is 0.4X while the metals have the lowest leverage, 0.1X. 3 out of the palm oil stocks have a leverage (negative net cash) which is bigger than 1X the market value.

Profit

In terms of profitability, metals enjoy the lowest cash costs ratio, 81%, palm is highest, 85%. Coal & palm costs are higher than five year averages & ratios should improve with higher prices. The tech stocks have cost ratios in the 60% range. It’s crazy that tech should have better margins than materials which they use. This should now reverse.

Value

Average market value is Rp 54 trillion for metals, Rp 27 trillion for coal, only Rp 7.8 trillion for palm. Metals are 2.4X price to assets, coal 1X, palm only 0.5X! The bottom line is how much upside we now see. On average the metals have already beaten our target, while coal has 141% upside, but palm wins with 154%.