Peabody Sets Up in Singapore

Peabody Energy (BTU - Analyst Report) has set up a new office in Singapore, which will serve as the hub for its trading and brokerage activities in Southeast Asia. This will further strengthen Peabody’s access to high-growth seaborne coal markets in the region, especially China and India, which are expected to be the demand drivers in both near and long terms. 

Peabody has access to emerging Asian economies via its Australian operations. Australian seaborne thermal and metallurgical coal is the highest valued coal in the world due to its high Btu content and its proximity to major consuming markets such as China and India. 

Coal is assumed to be the fastest growing fuel over the next 20 years and China and India will constitute over 50% of that demand growth. Peabody intends to cash on the opportunity leveraging its strong balance sheet, global platform and low-cost operating base. The opening of a new trading office in Singapore validates that. 

Peabody shares closed at $40.64 on Wednesday, trading at 11.4X trailing 12-month EPS versus 20.7X of the peer group. We maintain our Neutral recommendation for the company.

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