New World Resources Plc tumbled the most in almost two years after JPMorgan Chase & Co. said the loss-making Czech coal company may struggle to refinance debt.
The stock slumped as much as 15 percent, its steepest drop since August 2011, and traded down 13 percent at 34.45 koruna by 2:46 p.m. in Prague, the lowest price on record. NWR headed for its biggest weekly decline since October 2008. Traded volume was more than six times the three-month daily average.
JPMorgan lowered its price projection by 56 percent and reiterated its underweight recommendation after the biggest Czech coking-coal producer said yesterday it suffered a net loss of 80.3 million euros ($103 million) in the first quarter. The company said it will curb investment, shut down unprofitable mines and sell its coke plant to buoy its finances.
“The first-quarter results reveal elevated cash burn,” Roger Bell, a JPMorgan analyst in London, wrote in a report to clients dated yesterday. “We anticipate the business should be able to manage until 2018, at which point an about 500 million-euro bond maturity presents very challenging refinancing risk.”
The selloff cut the stock’s 14-day relative strength index to eight, its lowest reading in Czech trading and below the 30 level that signals in technical analysis the asset may be oversold and set for a rebound. In London, where NWR has a secondary listing, the stock rose 2.2 percent to 108.7 pence, paring this week’s drop to 29 percent and lifting the RSI to 18.
NWR spokesman Joe Cook was not able to immediately comment on JPMorgan’s report when contacted by phone.
Bell cut his price estimate for NWR’s London shares to 70 pence from 160 pence in the JPMorgan report.
“We expect NWR’s shares will continue to underperform,” he said. “Though management is implementing 100 million euros of cash-improvement measures, if current coal prices persist we forecast a cash burn of about 190 million euros by the end of 2014, meaning we would expect NWR to breach its 110 million-euro minimum cash balance as required by its lenders.”