Golden Energy & Resources - RHB Invest 2017-08-16: In-Line 1H17 Earnings


Golden Energy & Resources - RHB Invest 2017-08-16: In-Line 1H17 Earnings GOLDEN ENERGY AND RESOURCESLTD AUE.SI

Golden Energy & Resources - In-Line 1H17 Earnings

  • Golden Energy and Resources (GEAR) booked 1H17’s earnings (net of minority interest) of USD30.8m, which was within our and consensus’ expectations (38% and 37.9% of our and consensus’ FY17F estimates). 
  • We believe its higher coal sales volume in 2H17F should catch up. 
  • Its interim dividend of SGD0.008/share generates a dividend yield of 2.05%, which is higher than our expectations. 
  • We maintain our assumptions and reiterate BUY with a DCF- based TP of SGD0.71 (82% upside). 
  • GEAR is one of the few listed coal companies that should have a sizable organic volume growth ahead.



On track to reach 14m tonnes FY17F coal production. 

  • Golden Energy and Resources (GEAR) achieved a 1H17 coal production volume of 6.01m tonnes (+39.5% YoY) despite an extended monsoon season. It claims that it is on track to reach FY17F’s coal production target of 14m tonnes (+47.3% YoY).


In-line 1H17 earnings. 

  • GEAR’s 1H17 coal production of 6.01m tonnes is still 42.9% of its FY17F coal production target. It booked 1H17 earnings (net of minority interest) of USD30.8m, which is within our and consensus’ expectations ie 38% and 37.9% of our and consensus’ FY17F estimates respectively. We think its higher coal sales volume in 2H17F should catch up.


Interim dividend yielding dividend yield of 2.05%. 

  • GEAR would distribute an interim cash dividend of SGD0.008/ordinary share, which generates a dividend yield of 2.05%. 
  • The dividend yield from its interim dividend is higher than our expected dividend yield of 0.3%. Ex date is on 18 Aug 2017 and payment date is on 4 Sep 2017.


Net cash position keeps expanding. 

  • The company has a healthy balance sheet. The proceeds from a ramp-up in its coal production has allowed GEAR’s net cash position to keep expanding to USD34m in Jun 2017 from USD29m in Dec 2016.


Maintaining ambitious organic volume growth target. 

  • GEAR is one of the few listed coal companies that is aiming for a sizable organic volume growth target. 
  • Mr Raden Utoro, Golden Energy Mines’ director, who has been instrumental in increasing the coal production of Kaltim Prima Coal – a coal mining company with one of the world’s largest open-pit mining – reiterated his target to reach the coal production target of 36m tonnes in 2021 (vs 9.5m tonnes in 2016).


Reiterate BUY. 

  • We maintain our assumptions and reiterate our call with a DCF-derived TP of SGD0.71 (WACC:10.8%. LTG: 0%) that implies FY17F and FY18F P/Es of 14.7x and 12.4x respectively. We think this is justified as we expect its ROAE to increase to more than 20% with a significant forecast production growth ahead. 
  • Main catalyst of the share price is the substantial earnings growth going forward due to a sizable increase in coal production.
  • Key risks to our call include execution risks in ramping up coal production, weaker-than-expected coal demand and price, as well as regulatory risks.




Singapore Research RHB Invest | http://www.rhbinvest.com.sg/ 2017-08-16
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.710 Same 0.710



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