Anglo Pacific Delivers Record Performance As Royalty Income Increases

Anglo Pacific Group (GB: APF) pleased shareholders by posting a 303% increase in its portfolio contribution of $92.8 million in the first half. The pre-tax profit during the period increased from $11.2 million to $130 million. The company benefited from a surge in coal prices following the Russia-Ukraine war.
The highlight of its results was the royalty income from the Kestrel mine in Queensland. The Queensland government recently revised its royalty rates, which benefited the company in a big way.
On the financial front, the company was able to reduce its net debt to $20.5 million, down from $90 million in December 2021. The record performance helped the company to reduce its debt to such a great extent and to provide financial strength for future growth.
Considering the healthy balance sheet, the company is well-positioned for more acquisitions and better shareholder returns. It announced a quarterly dividend of 1.75p per share to be paid by the end of August 2022. Anglo Pacific has a dividend yield of 4.38% as compared to the sector average of 1.99%.
What does the Anglo Pacific Group do?
Anglo Pacific Group is a UK-based royalty business. The company invests in natural resources projects and earns royalties from them.
It mainly invests in non-precious metals such as iron ore, steel-making coal, copper, nickel, cobalt, etc. The company is diversified in terms of assets and locations, which gives it an advantage in mitigating risks and managing better cash flows.
The road ahead
The company is betting big on future-facing commodities such as copper, nickel, cobalt, uranium, and vanadium. It will attach around 90% of its revenue to these commodities by 2026.
In the last few years, the company has shifted its focus towards renewable energy to reduce its dependency on coal and other fossil fuels. Along with meeting its sustainable goals, the company is also looking at developing its portfolio to meet the high demand as the world is moving towards such commodities.
Anglo Pacific share price forecast
According to TipRanks’ analyst rating consensus, Anglo Pacific stock has a Strong Buy rating, based on four Buy recommendations.
The APF price target is 337.5p with an upside potential of 112%. The analyst price targets range from a low of 250p to a high of 390p.
Richard Hatch from Berenberg Bank, who rates stocks from the basic material sector is very bullish on the stock. After the company announced results, he reiterated his buy rating with a target price of 390p. This price suggests an upside of 145% from the current price.
Hatch said now was a better time to be buying, as, “The company is well positioned to take advantage of less demanding deal valuations given the recent softening of the commodity complex.”
The company is looking at strong long-term growth, as it sits on a portfolio of future commodity baskets.