Singapore-listed Golden Energy & Resources, as a holding company, has a key subsidiary, 64%-owned Stanmore Resources (SMR) which is listed on the Australian Exchange. A producer of coking coal used in steel production, Stanmore has been greatly transformed into a big-cap company following its US$1.35 billion acquisition of an 80% interest in BHP Mitsui Coal on 3 May 2022. Last week, Stanmore (market cap: A$2 billion) announced it has committed to acquire the remaining 20% stake for US$380 million cash, which will be funded from internal resources.  Aussie broker Petra Capital, in a report today, said: "With 100% ownership now secured, a strong 2H is expected, we see US$579m EBITDA in 2H without factoring in potential business improvements and coal prices which are starting to trend up."

SMR has released a solid 1H CY22 result, with underlying EBITDA of US$726m in line with our US$723m estimate.

Reported NPAT of US$233m was impacted by significant accounting adjustments (mainly inventory revaluation) and costs associated with the BMC acquisition.

Strong cash flow enables the US$380m cash payment for the 20% Mitsui stake to be internally funded.

With 100% ownership now secured, a strong 2H is expected, we see US$579m EBITDA in 2H without factoring in potential business improvements and coal prices which are starting to trend up.

With 100% upside to valuation, we maintain the BUY with A$4.60/sh PT (prev. A$4.47/sh), with the additional $0.39/sh value from the Mitsui stake largely eroded by higher operating costs which we assume now remain at current levels longer term.