BANPU Shares Gain 3% on Upbeat Coal Price Outlook

Banpu Pcl. (SET: BANPU) shares increased by nearly 3% on Friday as analysts predicted more demand for natural gas due to the effects of El Niño, which drives up the cost of energy, including coal. 

The share price of BANPU rose THB0.25/share, or 2.84%, to THB9.05/share as of 11.16 A.M. Bangkok time, with a trading value of THB515 million.

In early June, the United States’ National Oceanic and Atmospheric Administration (NOAA) announced that the anticipated El Niño had emerged, with moderate-to-strong effects expected by late fall/early winter.

El Niño is a climatic phenomenon that happens roughly once every 2–7 years and has been defined by higher-than-average sea surface temperatures in the central and eastern Pacific Ocean close to the equator.

The agency predicts an 84% possibility of an El Niño of at least moderate strength this coming winter, with a 56% risk of a strong El Niño. 

In its research, Kasikorn Securities expected that El Niño will drive up prices for natural gas and coal given the anticipated spike in demand.   

The price of natural gas in Europe increased by 16% DoD and 45% WoW to 36 euros/MWh recently, while the price of coal decreased by 2%. If the price of coal follows that of natural gas, this would be an opportunity to buy BANPU stock (now trading on a 5.0x P/E and a 0.6x PBV), with a price target of THB9.40.