|
At first glance, it is puzzling: Golden Energy & Resources (GEAR) reported US$12.5 million in profit attributable to shareholders for 1H2019 -- but its comprehensive income attributable to shareholders was much higher, at US$56.8 million.
A positive surprise has happened: GEAR could realise a cash windfall if a takeover proposal announced on 7 Aug 2019 from privately-held Winfield Energy for Stanmore becomes binding. The takeover proposal comes with an indicative price of between A$1.50 and A$1.70 per share in cash. That's a 58% - 80% premium to what GEAR paid for its stake less than a year ago (see table). Meanwhile, GEAR said it continues to evaluate other potential acquisition targets in counter-cyclical commodities. |
||||||||||||||||||||||||
Mark Zhou, senior head of investments at GEAR. NextInsight file photoIn its core business of coal mining and coal trading, GEAR has had mixed fortunes.
In 1H2019, it delivered record revenue of US$500.4 million (+3.9% y-o-y).
It's the result of hard work (compared to its passive investments in ASX-listed equities), mining and selling 12.6 million tonnes of coal from its Indonesian mines (+38.5% y-o-y).
90% of the revenue came from coal mining, 10% from coal trading.
The higher tonnage mitigated a fall in the average selling price of its coal: The ASP was US$35.80 per tonne in 1H19 versus US$44.90 in 1H18.
|
Stock price |
19 c |
|
52-week range |
18–33 c |
|
PE (ttm) |
19 |
|
Market cap |
S$447 m |
|
Shares outstanding |
2.35 b |
|
Dividend |
1.53% |
|
1-year return |
-36% |
| Source: Bloomberg |
Meanwhile, on the expense side, its cash cost per tonne declined to US$23.56 in 1H2019 from US$25.98 in 1H2018.
GEAR's key revenue contributors in 1H2019, by geography, are:
• Indonesia (36%), where GEAR has exceeded its "domestic market obligations";
• China (34%) which has seen a decline in coal imports for environmental reasons, and
• India (23%).
In the current 3Q19, the ASP of GEAR's coal has softened further, as reflected by the ICI4 coal index.
After producing 12.6 tonnes of coal in 1H2019, GEAR is on track to produce 25 million tonnes of coal, as guided at the start of the year.  At Bunati port, owned by GEAR: This is where most of GEAR's coal is transferred by conveyor belts to barges, which then transport the coal to mother vessels. Photo: CompanyIt would be record production, made possible by its on-going investment (at the rate of USD30-40 m capex a year) in infrastructure such as roads and processing capacity at its key Bunati port. Achieving or exceeding its production targets continues to be a hallmark of GEAR, cushioning a downtrend in ASPs and keeping GEAR profitable. GEAR has declared an interim dividend of 0.29 Singapore cent a share (2Q18: nil). |