Morningstar

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Equity Bottom-Up

Soul Pattinson shares have declined about 20% from recent highs of almost AUD 32 per share in November 2018 but they remain overvalued. Both New Hope and TPG Telecom are trading somewhat above our fair value estimates. However, the overvaluation primarily reflects Soul Pattinson’s market premium relative to the sum of the parts of the underlying assets. We think the premium reflects a view that management can reliably create market beating returns. This is supported by the firm’s strong track…

We raise our sum-of-the-parts-based fair value estimate for no-moat Soul Pattinson to AUD 16 per share from AUD 15 previously. The increase reflects the benefit of our higher fair value estimate for New Hope, given higher near-term and longer-term coal price assumptions, favourable movements in the value of other listed and unlisted investments in the past six months, and the time value of money. Soul Pattinson’s fiscal 2018 adjusted net profit after tax increased 17% to AUD 331 million, in line…

We raise our sum-of-the-parts-based fair value estimate for no-moat-rated Soul Pattinson to AUD 15.00 per share versus AUD 14.10 per share previously. The increase reflects our higher fair value estimate for New Hope, the favourable acquisition of the Jaguar operation from Independence Group, and the time value of money. The 5% higher fair value estimate for 50%-owned New Hope is due to the favourable near-term thermal coal price. While the recently acquired Jaguar mine suffers relatively high…

We maintain our sum-of-the-parts-based AUD 15.00 per share fair value estimate for no-moat-rated Soul Pattinson. First-half fiscal 2017 adjusted net profit of AUD 149 million was up 60% on a year ago and was stronger than expected. Improved profitability at New Hope was a major driver, due to higher coal prices and the first full half contribution of the Bengalla mine. TPG Telecom also did a better-than-expected job of combating earnings pressure from the rollout of the NBN while Brickworks…

Australia

Washington H. Soul Pattinson & Company Limited is an investment holding company. The Company owns shares and properties, coal mining, bulk handling, commercial television licensee, telecommunications carrier, merchant banking, funds management, pharmaceutical retailing, manufacture, processing and marketing of biscuits and cakes.

Washington H. Soul Pattinson and Co. Ltd (SOL AU)

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