Excerpts from Phillip Securities Research report

Analyst: Chen Guangzhi

tungkumhon3.17Geo Energy CEO Tung Kum Hon at a FY2016 results briefing. NextInsight photo US$182.1mn revenue met 97.8% of our full year expectation of US$186.1mn. 

♦ US$22.2mn PATMI exceeded our full year expectation of US$19.9mn by 11.6% 

♦ 1 SG cent first and final dividend declared for FY16 

♦ We slightly revise up our FY17e/FY18e PATMI forecasts to US$41mn/US$58mn (Previous: US$39mn/US$56mn). 

Based on unchanged PER of 11x and USD/SGD 1.3x that stated in our initiation report, we maintain our TP of SG0.45 for FY17.Our TP implies a 60.7% return from the last close price of S$0.28.



China continues to curb coal production capacity
“Report On The Work Of Government” announced in the National People’s Congress and the Chinese Political Consultative Conference recently disclosed that in 2016 the curb on coal production capacity reached more than 290mn tonnes, surpassing the annual target of 250mn tonnes.

Geo Energy

Share price: 
$0.28

Target: 
$0.45

In 2017, the central government aims to cut more than 170mn tonnes of coal production. We expect that the shortfall in supply side might not match with the reduction in coal demand.

 US$’m

2016

2017F

Revenue

182

310

Gross profit

42

72

Profit after tax and minority interests

22

41

Therefore, we still believe the coal price will be stabilised at c.US$40/tonne (ICI 4,200 GAR) and the amount of coal import to China remains at the same level in FY17 as in FY16.

Valuation
We maintain our forecast 8.5mn tonnes of coal sales volume with US$37/tonne average selling price (ASP) in FY17. (FY16: 5.5mn tonnes of coal sales with US$33/tonne ASP).

The coal price (ICI 4,200 GAR) was c.US$45/tonne in Feb-17. We slightly revise up our FY17e/FY18e PATMI forecasts to US$41mn/US$58mn (Previous: US$39mn/US$56mn).

Based on unchanged PER of 11x and USD/SGD 1.3x that stated in our initiation report, we maintain our TP of SG0.45 for FY17.


Full report here. 


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