ARLP - Alliance Resource: Poised For Significant Shareholder Returns
2024-05-31 09:19:51 ET
Summary
- The domestic thermal coal market has significantly more runway than the market is pricing in.
- Alliance (and its peers) have proven to deliver significant free cash flow even in the face of near all time low natural gas prices.
- Following a capex-heavy 2024, management will have the opportunity to unlock significant returns through share buybacks in the medium term.
- The market has not given management credit for the buildout of its oil and gas royalty business worth a third of the company's equity value today.
- In the long run, Alliance is in the unique position to use years of 'melting ice cube' cash flows to opportunistically expand its capital-light O&G royalty business.
For those looking to profit from the coming rise in domestic natural gas prices, buying thermal coal producers at today's bargain valuations offers asymmetric upside.
Alliance Resource Partners ( ARLP ) offers significantly undervalued and high-yielding exposure to thermal coal tailwinds with meaningful growth potential through its attractive royalty business.