Expiry:
Target Price
$0.285
(+23.91%)
NOW:

$Geo Energy Res(RE4.SI)

FY2018 production guidance of 11-12mil tonnes would mean a 50% increase from 2017's figures.
Q4 2017's ave selling price of $43.41 per tonne is the highest amongst all 4 quarters in 2017, and well, actually, the highest thus far since Q1 2016.
Taking FY17's EPS of 2.88 US cents, that'd be a projected EPS of 4.32 US cents for 2018, or approximately 5.6 SG cents.
Let's include a 30% discount for MOS and to account for the unearned earnings, that's leave us with 3.93 SG cents for FY18, making the forward PE based on the current $0.23, a very low 5.85x.

Immediate catalysts: upcoming offtake agreement for TBR site.
BUMA has already proceeded to start mining the site, actual production will commence in 2 weeks +, at the start of Q2.
Thus, it is not unreasonable to expect offtake agreement to be finalized within the next month.

Immediate risks: Jan 2018 production figures are still not good.
TTI's expectations for Q1 2018: Tonnage mined to be similar to Q1 2017's, but ASP to be 10% or so higher than that of Q1 2017.
(Q1 2017's ASP is $39.45)

Estimate is for 6 months, as the Q2 production figures (Which would include TBR's), would be disclosed in Q2 2018's results which should be sometime in Aug 2018.

Disclosure: at the time of writing this, I own 600,000 shares at an average price of $0.168

UPDATES:
Always interesting to go back to see how my thoughts months ago have panned out.
Above, I wrote:
"TTI's expectations for Q1 2018: Tonnage mined to be similar to Q1 2017's, but ASP to be 10% or so higher than that of Q1 2017."

Results: Q1 2017 tonnage: 2,212,893 tonnes. Q1 2018 tonnage: 1,936,817
A miss of 276,076 tonnes
Quite close, but still a miss.

Q1 2017 ASP: $39.45 Q1 2018 ASP: $46.49
A rise of 17.8%, substantially higher than the 10% or so that I wrote above.

As of Q1 results, taking into account financing costs, I'm expecting full year EPS of 3.75 US cents (taking into account MOS already). Assuming a PE of 6x (substantially below its peers to account for poorer operating metrics), share price would be $0.30.

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53 comments
ThumbTackInvestor

Just took profit on 100,000 shares at $0.25. Bought these in March at $0.235. So a profit of $1.5k means.... I just created my own "interim dividend"? lol
Still holding onto 500,000 shares.
Will buy back again if it pulls back tom, otherwise, 500,000 shares is adequate enough an exposure.

NoeticInvestor

Reply to @ThumbTackInvestor : Well done. Proton canon power increased..

ThumbTackInvestor

Updated views above, after analyzing FY18Q1 results.
So... what are markets missing out on, which leads to the mispricing?
Basically, the exponential growth in earnings when new production comes online.
Rise in costs will be much slower than the rise in earnings.

Assumptions I made:
1) Gross profit per tonne averages $10.5/tonne (or higher) from Q2-Q4. (FY18Q1 it's $11.31/tonne, FY17Q1 it's $11.45/tonne)
2) Company meets it's guidance of 11mil tonnes production for FY18 (achieved 1,936,817 tonnes in Q1 from SDJ alone)
3) No major, additional SG&A costs from any additional acquisitions for FY18

With a MOS of 20%+, I'm expecting EPS of 3.75 US cents for FY18, or 5.025 SG cents.
At a PE multiple of 6x, that's around 30 SG cents.

clim

Reply to @ThumbTackInvestor : Aha...i see...thanks for the great info, seems like you have studied a lot of commodities (coal, LNG, lithium, stainless steel) LOL

In that case I should study more into the power generation and consumption in China... whereas for Geo's internal affairs, can only keep an eye. :)

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ThumbTackInvestor

I'm sharing just 1 part of an email that a reader of SG TTI forwarded to me.
It's part of his correspondence with Tung and IR.

2. Your TBR mine has yet to commence production. Could you enlighten me if the terms of mining service agreement will also be tied to coal price index ?

GEO: Yes. BUMA will be appointed as the mining contractor as we have announced earlier. It is quite normal to benchmarked to coal price to manage costs increase in tandem to selling price.

Is this a norm ? Will the terms be more favorable compared to SDJ LOM deal which was signed when coal were at depressed prices ?

GEO: The pricing will be competitive based on current market price and volume of business. Any price negotiation cannot be based on past pricing, not just for Geo. An appropriate announcement will be made upon the signing of the mining services contract for TBR.

sysy

Reply to @ThumbTackInvestor : Thanks for sharing :)

ThumbTackInvestor

well....look at this...
Tung is probably aware of SG TTI's analysis on Geo, and he has this to say...

LOL!

Dafc78d0ce0b252295d1a47162d67706630f89d9
ThumbTackInvestor

Reply to @cherrykoh : Briefing was not in SG I think

It basically means they’re considering derisking by bringing in partners to take up equity stake in the TBR mine lo

In this way, they derisk by cashing out partially on a mature mine that’s ready to produce, but in turn, give up a portion of the future earnings from the mine

They’d likely use proceeds to acquire other assets that are still greenfield

Geo’s strategy is to be asset owner, kinda like the developer for a project. The develop sub con out the construction to someone else.
Similarly, Geo Sub cons out the mining and focuses on acquiring n management of the mines

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Sinkie

Support tti thread, imo I think there is a fund unloading coal stocks lately, the selling of blackgold and golden energy seems to be subdued, so let's hope last Friday beating of geo energy will be near the end of their selling.

pfyap

Coal industry is not yet in play lately so price does not go up. Offtake agreement might push up the price a bit but i believe it will come down again. So I think GEO price will go up and break new high if 1) Coal industrial related shares in play again, or 2) unexpected great news.

ThumbTackInvestor

Reply to @pfyap : To a certain extent, can’t say I disagree with this.
Offtake agreement alone probably won’t be a permanent mover of the share price, it’s too transient

cherrykoh

jus to add in my.3.cents worth of comment- when retail investors think that gd news (offtake agreement or M&a) and better profit going forward, the bbs will.push the price down. heavily controlled by bbs stock hehe

ThumbTackInvestor

Reply to @cherrykoh : well, I still have 100,000 shares loaned out.
Just received $68 as loan fee for Feb.

cherrykoh

Fr SGX CDP: 50,000 GEO ENERGY RES will be credited into your account on 19 Mar 2018. For enquiries, please call +65 6535 7511.

i supported u by slowly collecting bit by bit

wongchinfatt

I saw many people analyse this stock with strong theory and figures for about a year, highest price ever was about 33c then keep sliding. After few quarter's record profit, price went down even further...the more positive the comment, the lower the price...announce offtake agreement, price down. production going up, price down, 8% dividend return, price down, coal price surge, price down...any good news, price down. it feel more painful than invest into Midas + noble + Ezra all add together.

clim

Reply to @duckie : ahaha ya i also comment here a... online is different ma... than the physical visit to KR :)

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Rolling_stock

Should move to the next resistance level of $0.285. Just need some catalyst but don't know when ? I think the bottom line is that it must have good quarterly earning result and good sentiment like $Best World.

5ede8b56919fb4aca349d00be78ee37cf8d7e015
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$Geo Energy Res(RE4.SI) $Golden Energy(AUE.SI)

Current export coal prices likely to stay depressed until the end of 2018, until China’s NDRC comes out with a new import policy
Traders and middlemen are panicking and letting go of stock.
Many are very much willing to negotiate... and the ground level actual FOB prices offered, are still lower than the transacted prices that I found.

When it turns though, it’d also mean that I know it just a tad earlier than the typical retail investor... esp since most of the related parties r not even in SG.
I’m happy to hear traders unloading inventory actually, when coastal plants demand come back on, it’d hopefully be in an under supplied market.

TTI’s way of scuttlebutt-ing means unfortunately, I end up wasting the time of a few real businesses who think they have an end client...
Yea, I know, a bit of an arsehole but ah well, I do what I have to do to get the information I need to have...

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$Geo Energy Res(RE4.SI)

From the posts and comments, it’s obvious that many SHs have been scared shitless. Lol.
But of course.
I’ve gotten quite a few questions, so this post will answer it all. Hopefully.
1stly, why the big drop today?
The clear answer is the big drop in GAR 4200 coal prices.
It’s not just Geo, most of the Indo coal players have dropped of late.
Geo’s drop is compounded by their comparative yoy drop in earnings.
Revenue has actually increased, production cost has increased, but only slightly. The bulk of the decrease in earnings comes from the massive debt financing costs.
So the 2 causes are:
1) Drop in coal prices
2) Lower earnings compared to the corresponding period yoy

Let me explain why I’m not overly concerned. And this is where some DD comes into play.
Let me start with 2) first.
The financing costs in the form of the bonds are indeed high and eating away at the profits. And I do fault Tung for not deploying the funds faster, but at the same time, now is exactly the wrong time to be bailing out Cos of financing fees. Cos now that TBR offtake is finalized, the overburden removal is completed, increasing of barge and export facilities are upgraded... and TBR has exported its first 0.2mil tonnage, what remains is to ramp up production in subsequent quarters. Which doesn’t require much effort.
Managements next step is to look at deploying the funds, both from the bonds and from Macquarie, into acquisitions.
So forget about 2018, I think the lowered earnings would reverse in 2019.

Now, back to 1)
This is the major worry. China has scaled back their imports, resulting in a crash in coal prices.
Traders have stopped restocking, leaving miners and middlemen with too much coal stocks on their hands, and they’re trying to dump them on the market, hence undercutting each other.
Also, as prices come down, the higher calorific values are now value for money as thermal coal, displacing the 4200 low sulphuric coal for “coal mixing” to keep within the max sulphuric levels requirement.
Just to give a sense, Gar 4200 prices were as high as $70/t, dropped to an average of $41.50 in Q3, and Went as low as $29, $30 /tonne last week (just once!)
It has rebounded slightly and right now, is at $32/t.
I don’t agaration and put up these figures.
I do my homework while everyone else guesstimates the cause of the drop. (See attached)

Now, what gives me the guts to average up and continue adding if necessary?
Cos I think the $30/t is the floor for Gar 4200.
Why so?
Simply cos the production costs for most producers in Q3 is around that level!
Selling coal below that, is to sell it at a loss.
Geo’s production cost is $30.72/tonne in Q3, and that’s including the costs of starting a new mine (TBR).
It always costs more at the start Cos of the higher overburden removal, higher strip ratio, and all the misc costs of laying new access roads etc.
(See attached, I’ve even highlighted the paragraph for Geo for u)
GEAR’s production costs in Q3 is slightly higher than Geo’s, although admittedly, it’s lower than Geo’s in 1H.
Now:
Average Selling Price (ASP) - Production costs = Cash Profit

In Q3, Geo’s ASP is $43.48/t, production cost is $30.72/t, giving a profit of $12.76/t.

GEAR’s ASP is $40.80/t in Q3.
Adaro energy doesn’t release its exact ASP, but it’s a 9% increase in Q3 compared to Q2, which is lower than Geo’s increase.

In other words, at below $30/t, almost all the producers are going to sell coal at a loss.
Would they start dumping at a loss? I doubt it.
That’s why there’s a shipment last week at below cost, but it quickly rebounded back to $32 today.
China has suddenly increased import restrictions ahead of the seasonally high demand Q4 period and that has taken many miners by surprise. I don’t think this would last. Currently, coastal supplies can last 33days, so it’s on the high side. Once the stockpiles go down, China’s own production is insufficient and they’d have to start importing, and if there’s a brutal enough winter, they’d have to start importing with a vengeance.

Let’s look at Geos numbers now. In Q3, cash profit is $12.76/t.
I’m going to be more aggressive than all the analysts and assume coal prices remain low for a prolonged period of time into 2019.
Let’s assume a $35/t basis, giving Geo a cash profit of $5/t
(Rem production costs come down in 2019 due to synergies between SDJ and TBR)
Assuming a total production of 10mil tonnes
(Revises tonnage guidance given by management is 10-15mil for 2019)
That gives Geo a profit of $50mil.
With the increased number of shares from Macquarie stake, it’s still EPS of 3.6 US cents.
Taking away 20% as an additional MOS, with a forex conversion of 1.35, I’m left with 3.86 SG cents.
At the current price, that gives me a forward PE of 4.8x.
Also, the div of 2 cents gives a yield of about 10.6%.
And even if we cut away the interim div, it’s still 5.3%, which is pretty respectable.

Going forward, the key is the ICI4 prices in the coming months.
So let’s see how it goes.
Of course, coal prices can tank and undergo a multi year bear market like in 2011,2012, and my bet will fall flat on its face.
(But I don’t think so)

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$Geo Energy Res(RE4.SI)

Paging TA and demand zone experts... pls help me to understand this:
https://www.stocksbnb.com/tech-pulse/techn...

so, 1) says "false bullish breakout"
Question:
1. Why does "2) 0.215 range low held up once again keeping the long term uptrend intact"? Why does that keep it intact? There are trillions of charts that show this, and after a while, it drops below this support.
So how would u determine that it would "keep the long term uptrend intact"?
When it drops below 0.215, then you'd say that is has "broken the support" and then the uptrend is no longer intact? But if so, isn't it reactive? What useful application would that have since you're always behind the information curve?
In fact, even in this same chart, there's also a horizontal support line at ard $0.25..... but it went down also right?

2) More importantly......
why does "3) Bullish break above the 0.23 range high and 20,60MA with increasing volume suggests further upside next"?
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Why is it this time it's not another "false" breakout? Why does it suggest "further upside next"?
I mean, logically, one can also say it suggest a "third time false bullish breakout" cos there were other instances?

I'm just trying to understand the logic behind this arcane science.
Is it logic, or is it emotional interpretation?
Is it predictive, or is it reactive?

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$Geo Energy Res(RE4.SI)

For those who tagged me about Geo's latest financials...
If you're wondering why Geo's results look good but the share price is disappointing, perhaps some of these images can answer your qn.
The macro picture here is more important because it is forward looking.
While the numbers are important, looking solely at the numbers and extrapolating ratios is like errr..... driving a car on the road and keeping your eyes on the speedometer on the dashboard.

The chart explains the market's concerns perfectly.

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50,000 shares of Geo Energy just got loaned out today.
Just received the mailer.

Currently, I have 110,000 shares loaned out.
Someone is shorting just before the ER, expecting the share price to drop with poor results

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