• When Paul Chew, the head of research at Phillip Securities, initiated coverage of Geo Energy Resources in April 2025, he used a Discounted Cash Flow (DCF) method for valuing the stock. • This DCF represents the cashflow from not just future coal sales but also, importantly, a toll road and a jetty to present value, accounting for the time value of money and risk. The infrastructure is being built with a June 2026 completion date.  • Paul had a target price of 47 cents. In the latest report, he upped it to 59 cents. What has changed? "As completion of the infrastructure is within schedule, we are lowering the discount on our valuation of the coal assets and toll revenue from the integrated infrastructure from 70% to 60%," wrote Paul. • In other words, as the project keeps moving along as scheduled, Paul’s more confident about its future prospects, and that’s reflected in his higher target price. If progress continues, expect that discount to drop further, and the target price to rise (assuming Paul’s other financial model assumptions hold steady). Perhaps sometime in early 2026, if the discount drops to 40%, the target price goes up to 83 cents.  Artist's impression of trucks delivering coal to the new jetty. Source: Company• Of course, the market is dynamic -- and things are turning positive for Geo Energy. Medium-term futures for coal have been trending up of late, for instance. When inputted into a financial model, such factors lead to new valuations. Paul's DCF model uses a 12% discount rate, which may be lowered (or increased) in future. • One thing’s clear—despite the Chief Operating Officer's share sale on 2 Oct, Geo’s future with the infrastructure project and, soon, a shipping logistics M&A looks bright. • Read more below what Paul says ... |
Excerpts from Phillip Securities report
Analyst: Paul Chew
Geo Energy Resources
Infrastructure build-out within schedule
| ▪ Construction of the 92 km hauling road and jetty in South Sumatra is 30% completed and on schedule. We expect at least 40% completion and 100% road clearance by year end. There is no change to the completion and commissioning by the middle of 2026, with an additional two months required for it to be fully operational. Once completed, our expected ramp in coal production in the TRA mine is 12mn in FY27 from 2mn in FY25e. Another 25mn MT of coal can be transported on the road, where toll rates ranging from US$6-8 per MT can be charged on other users, depending on the coal price. |
▪ Coal prices have stabilised at the US$42 per MT level after 20 months of decline.
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GEO ENERGY |
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Share price: |
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Coal production in China has started to contract 2% YoY in July-August. China is implementing tighter controls against overproduction.
▪ As completion of the infrastructure is within schedule, we are lowering the discount on our valuation of the coal assets and toll revenue from the integrated infrastructure from 70% to 60%.
Our DCF target price is raised from S$0.47 to S$0.59, and BUY recommendation is maintained.
There is no change to our FY25e forecast.
| Key Highlights |
Road and jetty construction within schedule. We expect the road to be 30% completed (or cut and filled) by the end of September. There was a delay in the percentage completed due to the additional US$40mn required to use slabs on piles (i.e., concrete) rather than wooden piles in swampy areas.
 "Completion of the road and jetty infrastructure by middle next year will catalyse several new income streams for Geo: (i) jump in TRA coal mine production from currently 2mn to 12mn by FY27e; (ii) toll revenue from other miners for the 25m MT of extra capacity; (iii) river transhipment fee from tugs and barges to be acquired; (iv) asset monetisation from partial sale of the entire infrastructure." -- Phillip Securities |
Multiple bridges with a capacity of over 200 MT are needed along the road.
Another milestone is the 100% clearing of the road, currently less than 12km remaining.
This will give the company full rights of use of the entire 92km.
The potential tolling road charges on the extra 25mn MT capacity are US$6-8 per MT, depending on the coal price.
| Opportunity to monetise the infrastructure |
Geo owns the infrastructure (road and jetty) through a 63.7% stake in Marga Bara Jaya (MBJ).
There is an opportunity to monetise the infrastructure even before completion by selling a stake to de-leverage or crystallise the underlying value of the road.
This can be pursued once offtake contracts on the usage of the road are completed with the mining concession around the road.
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 → Full report here.→ See also: GEO ENERGY: Big Money Flowing into Sumatran Coal -- and This Company's New Road to Riches |
