Geo Energy has cleared its immediate resistance at 0.38 in the morning and has continued to surge higher testing the critical 0.400. Top 10 Volume seen currently on this breakout which can signal momentum. Target to 0.43 then 0.45 first. Has been below the 0.38 resistance level for about 3 weeks forming a slight Ascending Triangle bullish pattern formation with resistance at 0.38. A break above this can signal more upside going forward. As long as 0.400 remains as a new support level, we are short term bullish with ultimate target at 0.45 to 0.48.
Stop loss at 0.385.
OCBC – 3RD SEPTEMBER 2013
Geo Energy Group: New kid on the
mining block
● Now a mine owner
● Adding five more concessions
● 15x PER vs. peers' 36x
Geo Energy Group
Geo Energy Group (GEG) is a coal mining
specialist in Indonesia, which started as a
mining contractor, and has since moved on
to become a mine owner. It currently owns
the BEK Mining Concession (which we visited
recently) and has entered into five other
mining concessions.
Visit to BEK site
Located on a 4570ha site in Kutai Barat
Regency, East Kalimantan, BEK has a 6-year
mine life based on 12.5m tonnes of reserves
(also has 30.7m tonnes of resources and a
20-year concession from Apr 2011). We
understand that GEG has produced some
1.84m tonnes of coal from this site as of 30
Jun; and the company believes it is on track
to achieve its 2m-tonne target by year end.
While the caloric value is just above 3400
GAR, we understand that prices have been
holding up pretty well (~US$31-34/ton)
despite the slide in Newcastle coal prices;
this as end customers switch down to
cheaper inputs in wake of the still-sluggish
economies in China and India.
Also went to BJPE site
We also visited a 739.9ha site where GEG
provides mining services to the owner of the
concession, BJPE. In addition, GEG has
exclusive marketing rights over the semicoking
and high-thermal coal produced there.
According to management, GEG will continue
to secure new mining services contracts like
this. And it believes that it has an edge over
its competitors as GEG owns its own
equipment, thus giving the company greater
flexibility and cost control.
Outlook for Indonesian coal remains
upbeat
Going forward, GEG remains upbeat about its
prospects, noting strong demand from
countries like China and India, even though
near-term coal prices are likely to remain
relatively soft due to the supply growth. We
do not have a rating on GEG. Currently, GEG
is trading at a historical PER of 15x versus
the simple average of 36x of its peers in
Indonesia.
No comments:
Post a Comment