Coal prices, which previously soared high, are now starting to decline. The last trading showed that the contract price of coal for February on the ICE Newcastle market was US$ 229 per ton, down 4.32% from the previous day. This price drop can be a negative sentiment for coal issuers and is reflected in the prices of their shares which tend to weaken.
However, Panin Sekuritas analyst, Felix Darmawan, considers that the current valuation of shares of coal issuers is still attractive. According to him, even though coal prices are declining, this should not be a reason to stay away from the shares of coal issuers. However, it should be noted that as long as coal prices fall, this will cause a bearish phase for coal issuers.
Along with the weakening of coal prices, the performance of coal issuers this year is likely to be depressed. This was caused by the decline in coal prices which resulted in the average selling price (ASP) of issuers in this sector falling. However, that doesn’t mean we have to stay away from shares of coal issuers.
The MNC Sekuritas research team recommends maintaining the coal sector’s overweight rating. They recommended buying PTBA, ADRO, and ITMG shares with a target price of IDR 4,600, IDR 4,550 and IDR 50,500 respectively.
Here are some reasons why it is still worth considering investing in shares of coal issuers:
Huge Profit Potential
Even though coal prices are down, coal issuers still have big profit potential. In the midst of efforts to increase infrastructure development in Indonesia, demand for coal is still high and is expected to continue to increase in the next few years. In the long term, this can have a positive impact on the share price of coal issuers.
Fundamental Improvements
Apart from that, improvement in fundamentals in the coal sector is also an important factor that can affect stock prices. Several coal issuers have restructured and improved their financial performance, so this can be a positive signal for their share prices in the future.
Attractive Prices
The valuation of shares of coal issuers is still attractive even though coal prices are declining. As long as the profit potential is still large, the shares of coal issuers can still be an attractive investment option.
In investing in shares of coal issuers, you should consider recommendations from experienced analysts. Even though the price of coal has decreased significantly, the valuation of shares of coal issuers is still attractive. However, investors should also pay attention to the bearish phase that can occur when coal prices fall. Thus, caution and careful study are needed before investing in shares of coal issuers.