The Stanmore board says a 95c per share takeover offer from Indonesian company Golden Investments “significantly undervalues” the burgeoning coal miner, and should be rejected.

On November 20, Stanmore (ASX:SMR) saw its share price surge 21 per cent to over $1 when a takeover offer was tabled by a new, 19.9 per cent shareholder — Golden Investments.

The stock is currently trade for around 99c, which is a 4c premium on the Golden Investments offer and a 90 per cent increase over the past year.

“Based on detailed analysis undertaken by the company and its advisers, the board’s very strong view is that the offer significantly undervalues your shares in Stanmore Coal, and shareholders should reject the offer,” Stanmore chairman Stewart Butel told investors.

“You will shortly receive a Bidder’s Statement from Golden Investments in relation to the offer. To reject the offer, shareholders should take no action.”

The Stanmore Coal (ASX:SMR) share price is up almost 90 per cent over the past 12 months.
The Stanmore Coal (ASX:SMR) share price is up almost 90 per cent over the past 12 months.

The young coal miner told investors that its Isaac Plains coking coal mine in Queensland was performing “above expectations” and would contribute to “underlying” EBITDA earnings of $130 million to $150 million this year, compared to $45.6 million last year.

“The offer implies an enterprise valuation for Stanmore of only $225 million, which values the shares at only 1.5 to 1.7 times our forecast FY 2019 [earnings],” Mr Butel said.

“This is materially below the trading multiples for the shares of all of the coal producing companies listed on ASX.”

Mr Butel also said the outlook for coking, or metallurgical, coal which is used in steelmaking remains positive.

“Metallurgical coal prices are well supported, and it is the company’s view that they will remain that way over the long term as there is no replacement technology for this product in the steelmaking process,” he said.