UPDATE: Imperial Capital Maintains on Westmoreland Coal

In a report published Monday, Imperial Capital analyst Matthew Farewell maintained an Outperform rating on Westmoreland Coal WLB raising its price target from $15.50 to $25.00 According to the report, “Our price target is 25% above the recent share price. The Sherritt acquisition will raise reported pro forma net leverage to 3.7x which the company will lower by 1.0 turn over 24 months. Westmoreland continues to use cash flow to pay down high cost debt and might be able to pursue a refinancing that would be accretive to shareholder. We estimate $34mn and $57mn in free cash flow in 2012 and 2014, respectively, before $30mn and $47mn in debt repayments/repurchases. We believe tendering for the notes below 110 in a refinancing would be accretive to shareholders.” The report also noted that the analysts are maintaining Buy on the 10.75 percent senior secured notes due to 2018 at a recent price of 110 (4.35% YTW). “Our $25 price target on the common stock implies 8.5x adjusted pro forma EV/2014E EBITDA and 11.7x adjusted EV/2014E EBITDA less capex (we adjust EV for pension and OPEB),” the report said. “Our $25/share price target represents a 16% free cash flow yield on our pro forma 2014 estimates. Comparable coal companies trade at 8.5X EV/2013E EBITDA and generally report negative free cash flow.” WLB closed Friday at $19.60.