Excerpts from KGI Research
Geo Energy (GERL SP)
| Hello to summer…and higher coal prices |
- RE-ITERATE BUY
Entry – 0.22 Target – 0.27 Stop Loss – 0.20 - GERL is one of Indonesia’s leading coal producers. The company has four mining concessions located in South and East Kalimantan. It is actively operating two mines and has recommenced mining operations at another mine, while planning to start exploration at another mine site.
- Highest quarterly sales. With the improvement of coal prices in 2021, the company is on track for a production of at least 10-11mn tonnes in 2021.
In 1Q2021, the company recorded its highest quarterly revenue of US$115mn on the back of higher average selling prices of US$41.84 per tonne for ICI4 (Indonesian Coal Index Price for 4,200 GAR coal), up from US$31.97 in 4Q2020 and US$34.44 in 1Q2020. As a result of the stronger performance, the group is now in a net cash position of US$23mn as at 31 March 2021. - Beyond high. Our last check showed that ICI4 now trades above US$60 per tonne, or 40% higher than GEO Energy’s 1Q2021 ASP. In the last cycle when coal prices were this high, GEO Energy’s share price traded between 22 and 35 Sing cents, vs its current share price of 0.23.
- Summer time = higher coal demand. China is the largest coal consumer in the world, and hence, its supply-demand dynamics is a key driver of coal prices.
In general, China has two peak coal consumption seasons, summer (June to August) and winter (November to January), and three high restocking (import) periods, spring (March to April), summer (July to August), and autumn (October to November). Read our recent coal write-up here.
