MARKETS SPECTATOR: Whitehaven's weird wobbles

Whitehaven's share price has been tracking down for six months indicating that investors knew of its woes. But why didn't we see that in analysts' take on its full year earnings?

No wonder Whitehaven major shareholder Nathan Tinkler threatened to spill the board earlier this week and demanded earnings guidance and updates on the key Narrabri and Maules Creek projects.

This morning’s production release and trading update from the coal miner has been sobering, to say the least. The miner warned that at current coal prices, full year EBITDA would be around $50 million versus the average market estimate of $185 million. All things being equal, this would result in a downgrade to the tune of 70 per cent from average analyst estimates.

One would naturally expect the share price to be decimated on the back of this sort of announcement, especially given the average estimates among brokers. Then again, the market is an unpredictable beast.

Price action this morning has been very interesting indeed. After being down as much at 7.8 per cent, which in itself is a reasonable performance, buyers have stepped in, pushing the share price higher to be only down 3 per cent.

image

Source – The Bourse

So it appears the market has already been factoring in a significant weakening in Whitehaven’s operating environment. This is entirely normal as the market is a leading indicator, but what makes it a bit bewildering is the average estimates among the broking community.

These guys control the big dollars in town and have clearly been exiting the stock over the last six or so months. So the question needs to be asked as to why these analysts had not significantly downgraded their full-year EBITDA expectations?

That’s a question we may never get an answer to. What we do know is that this latest drama does little to improve Mr Tinkler’s already cracking empire.