Primary Recommendation

UK Coal - Beneficiary of soaring energy prices plus land development wildcard

December 2004

Investing in shares may lose you all or some of your money. Past performance is no indication of future performance. Some of the shares recommended here may be small company shares, which can be relatively illiquid and hard to trade and this makes such shares more risky than other investments.

The recent re-rating of shares in UK Coal, Britain's largest independent coal miner, partly reflects investors' expectation that it will soon make windfall profits out of the surge in coal prices, which like most commodities, have risen on the back of China's insatiable appetite for energy. This, along with the first fruits of a far reaching efficiency drive, means that after a protracted period of losses, UK Coal is forecast to make a pretax profit of nearly Â£30m nextyear, before rising sharply again to Â£44m in 2006. But the baggage of its past means that investors are still not pricing this in, with next year's prospective PE being just 10.8 and falling to an even lower 7.2 in 2006, while the share price is also supported ...

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With small companies there is an above average degree of risk compared to buying blue chips. Please be aware that we have not assessed the suitability of any of these investments for you. The newsletter simply states a personal view and diarises the editor’s investment decisions. Please speak to your stockbroker or other qualified individual to ascertain whether any of these companies mentioned would form useful additions to your own portfolios. Past performance is no indication of future success.

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