Deutsche Bank Reiterates Hold Rating on Peabody Energy (BTU)

Deutsche Bank is out with an investor note this morning, where they reiterate their Hold rating on shares of Peabody Energy BTU; they have a $57.50 price target on the stock. DB analysts said, “BTU is bullish on coal and believes that we are in the early stages of a long-term supercycle, with demand expected to grow +50% (~3bn t) over the next 20 years as electrification continues around the globe – with coal remaining a key power source, as it has been over the past 10 years. BTU expects to benefit from this ongoing trend owing to its unique asset base (vast reserves, stable/low costs, etc) and growth potential in the US (as the PRB/IB captures share from CAPP), Australia and Asia - via green- field/brownfield expansions, partnerships and JVs.” They added, “Efforts to raise Australia platform to 35-40MM t by 2014 (from 22MM t) remain unchanged despite RSPT. In the US, BTU is aiming to sign deal in next 6 months to develop West Coast port to facilitate exports from the PRB (~20-30MM tpa operation with capex of $400-500mm). Further, BTU is targeting 100MM tpa out of Asia (ex Australia) by 2020, with key short-term initiatives including getting 1st JV in China across the finish line (15-20MM tpa operation with BTU holding a sizable minority stake), as well as entering Indonesia.” In regards to M&A, they said, “BTU has the means to carry through deals that 'move the needle', with no interest whatsoever in US APP assets. Macarthur deal could be revisited.”