KGI Securities (Singapore) Pte. Ltd.

April 1, 2025

Geo Energy Resources: Infrastructure Expansion Drives Future Growth

Company Overview: Geo Energy Resources Ltd (GERL SP/RE4.SI)

Geo Energy Resources is strategically positioned for future growth, leveraging infrastructure expansion and cost efficiency measures. The company’s US\$150 million investment in the MBJ Integrated Infrastructure Project is progressing as planned, with completion expected by 1H26. This project includes a 92km hauling road and jetty, set to reduce transportation costs by over US\$10 per tonne and double production capacity to 25Mt per year. Additionally, leasing the infrastructure to third parties is expected to generate additional revenue streams, enhancing long-term cash flow and profitability [[1]].

FY24 Performance: Resilient Amidst Market Volatility

Despite lower ICI4 coal prices, Geo Energy demonstrated resilience, achieving FY24 revenue of US\$401.9 million and a net profit of US\$37.3 million. The company maintained a competitive cash profit per tonne of US\$10.37. With a strong balance sheet and no major debt burden, Geo Energy is well-prepared for future growth [[1]].

Strategic Growth Initiatives: Acquisitions and Investments

Geo Energy is expanding its reserves and production capacity through strategic acquisitions, including PT Golden Eagle Energy. A US\$30 million investment from ResInvest increased its stake to 6.8%, while a US\$50 million to US\$100 million investment in MBJ infrastructure is expected to further support the company’s long-term expansion plans [[1]].

Favorable Market Outlook: Global Coal Demand

Global coal demand is projected to reach 8.9 billion tonnes by 2027. China’s record coal imports of 542.7Mt in 2024, a 14.4% year-over-year increase, are sustaining market stability. Thermal coal prices remain above 2019 levels, ensuring profitability for producers like Geo Energy [[1]].

Investment Recommendation: Maintain OUTPERFORM Rating

KGI Securities maintains an OUTPERFORM rating on Geo Energy with a downward revised target price (TP) of S\$0.71, reflecting adjustments in 2P reserves and lower-than-expected average selling prices [[1]].

FY24 Financials: Navigating Price Pressures with Cost Efficiency

Geo Energy reported FY24 revenue of US\$401.9 million, a slight decline from FY23 due to lower ICI4 coal prices. Net profit fell to US\$37.3 million, but cost efficiencies enabled the company to maintain a strong cash profit per tonne of US\$10.37. The company’s focus on operational efficiency and infrastructure development positions it well to capitalize on future demand growth. With a US\$118 million cash balance, Geo Energy maintains financial flexibility for future investments. The 1.0 S-cent per share distributable income highlights continued support for dividends and share buybacks. The repurchase of 4.5 million shares at an average price of S\$0.265 per share reinforces management’s confidence in long-term growth [[1]].

Resilient Operational Performance: Production and Resource Base

As of 31 December 2024, Geo Energy maintained stable coal production of 7.8Mt, with plans to gradually increase capacity to 25Mt annually upon completing its integrated infrastructure project by 1H26. The acquisition of PT Golden Eagle Energy enhances its resource base, reinforcing long-term production growth. With no immediate refinancing needs, the company is well-insulated from interest rate volatility, while long-term offtake agreements provide earnings stability despite fluctuations in coal prices [[1]].

Growth Strategy: Stable Coal Prices and Higher Production

With coal demand and supply in balance, prices are expected to remain relatively steady in FY25. Geo Energy’s top-line growth will be driven by higher production volumes rather than price fluctuations. The company targets FY25 production of 10.5-11.5Mt, and as of 2M25, the company has produced 2.4Mt, thus keeping its production target on track [[1]].

Valuation & Action: OUTPERFORM Rating Maintained

KGI Securities maintains an OUTPERFORM rating with a target price of S\$0.71, based on a discounted cash flow (DCF) valuation using a weighted average cost of capital (WACC) of 11.5% [[1]].

Key Risks: Market and Operational Factors

Risks include global coal price volatility, evolving energy landscapes, weather uncertainties, infrastructure project delays, and potential execution risks affecting production [[1]].

Financials & Key Operating Statistics

Here’s an overview of Geo Energy’s financial forecasts:

Source: Company Data, KGI Research *Net Cash (NC) [[1]]

Macroeconomic Outlook: Coal Demand and Market Trends

Coal remains a dominant global energy source, with demand projected to reach 8.9 billion tonnes by 2027. China, the world’s largest coal consumer, imported a record 542.7Mt in 2024, reflecting a 14.4% year-over-year increase due to lower international prices and slower domestic production growth of 1% year-over-year. While imports may decline slightly to 525Mt in 2025, coal remains 60% of China’s electricity mix, ensuring long-term demand stability [[2]].

China’s Coal Expansion and India’s Growing Industrial Needs

China continues aggressive coal expansion, approving 116GW of new coal power capacity in 2024, the highest in a decade. According to the Centre for Research on Energy and Clean Air (CREA), China began construction on 94.5GW of new coal-fired power plants in 2024, marking a 10-year high. This accounts for 93% of all new global coal power plant construction, with 3.3GW of previously suspended projects resuming. The substantial increase in capacity underscores China’s reliance on coal, despite its push for renewables [[2]].

India remains the second-largest coal importer, although its thermal coal imports fell by 3% in 2024 due to increased domestic production. However, coking coal imports rose by 4.7%, driven by growing demand in the steel and manufacturing sectors. With China and India accounting for over 50% of global coal imports, coal remains a critical energy source, benefiting exporters like Geo Energy [[2]].

Stable Coal Prices and Trade Dynamics

Global thermal coal prices have stabilized after falling from post-Ukraine war peaks. ICI4 coal prices are forecasted to trade between US\$50-US\$53 per tonne in 2025, supporting a strong pricing floor for producers. Indonesia recorded 775Mt of coal production in 2024, marking a 9.2% year-over-year increase, further reinforcing its position as a key supplier to China and India [[2]].

Favorable Market Conditions for Geo Energy

China’s continued coal reliance ensures strong import demand, benefiting Indonesian suppliers like Geo Energy. India’s growing industrial consumption, particularly for coking coal, supports stable exports. Global coal prices remain resilient, providing a strong pricing floor for producers. Indonesia’s record-high coal production reinforces its role as a key global supplier, positioning Geo Energy for sustained growth [[2]].

Business Updates: Infrastructure Expansion

Geo Energy is investing US\$150 million in its MBJ Integrated Infrastructure Project, including a 92km hauling road and jetty, to improve coal logistics in South Sumatra. This investment is expected to generate over US\$10 per tonne in transportation cost savings, significantly enhancing profit margins. Once completed in 1H26, the infrastructure will increase annual coal handling capacity to 50 million tonnes, enabling Geo to ramp up TRA mine production to 25 million tonnes per year. Additionally, third-party leasing of infrastructure will provide an additional revenue stream, securing long-term cash flow and strengthening financial stability [[3]].

Global Coal Market Outlook Supporting Geo Energy’s Position

Despite global decarbonization efforts, coal demand remains strong, particularly in China, India, and Southeast Asia. In 2024, China accounted for 41% of global coal imports, with a record-high 542.7 million tonnes, a 14.4% year-over-year increase, driven by lower international prices and slower domestic production growth. Meanwhile, coal demand in Southeast Asia is projected to grow 5% annually, fueled by industrialization and rising electricity needs [[4]].

While global thermal coal prices have eased from post-Ukraine war highs, they remain relatively stable, slightly below the 2018-current average. ICI4 coal prices are forecasted to trade between US\$50–US\$53 per tonne in 2025, providing a stable pricing environment for producers. Additionally, Indonesia’s record 775 million tonnes coal production in 2024, a 9.2% year-over-year increase, solidifies its position as a key supplier. As a low-cost producer, Geo Energy is well-positioned to capitalize on resilient coal demand while maintaining competitive pricing power [[4]].

Strategic Growth via Acquisitions and Financial Strength

Geo Energy has been expanding its market position through strategic acquisitions and investments. The acquisition of PT Golden Eagle Energy enhances its reserves and production capacity, securing long-term growth. Additionally, the company secured a US\$35 million investment from ResInvest, increasing ResInvest’s stake to 6.8%. Furthermore, an MOU for an additional US\$50mn-US\$100mn investment in MBJ infrastructure strengthens its expansion plans [[4]].

With a strong balance sheet and liquidity, Geo Energy has flexibility for acquisitions, infrastructure development, and potential shareholder returns via dividends and share buybacks. The company’s ability to execute opportunistic divestments at a premium, as demonstrated in past transactions, further reinforces its financial resilience and long-term value creation [[4]].

Strong Growth Outlook for FY25 with Increased Sales and Production

Geo Energy is targeting coal sales of 10.5-11.5 million tonnes in FY25, marking a 33%-46% increase year-over-year, supported by:

• Higher expected sales from TRA mine expansion.
• Potential upside from coal price stabilization at US\$50-US\$53 per tonne.

With China and India accounting for over 50% of global coal imports, sustained demand will continue to support stable pricing. Geo Energy’s cost-efficient production model ensures profitability even in a softening price environment, positioning the company for long-term sustainable growth [[5]].

Conclusion: Attractive Investment Opportunity

Geo Energy remains well-positioned to capitalize on strong Asian coal demand, maintain profitability, and generate sustainable shareholder returns. With stable coal prices, a cost-efficient production model, and a strong balance sheet, the company continues to present an attractive investment opportunity in 2025 [[5]].

Valuation: Revised Target Price

KGI Securities maintains its OUTPERFORM recommendation for Geo Energy, with a revised target price of S\$0.71 per share, reflecting adjustments to coal production figures extracted from the IQPR report due to inefficiencies in the production process. This valuation is based on a discounted cash flow (DCF) model, incorporating the expected lifespan and coal production capacity of each mine, while accounting for potential fluctuations in coal supply and demand. Using a weighted average cost of capital (WACC) of 11.5%, the analysis suggests a potential upside of 122% at the revised target price [[6]].

The valuation does not factor in revenue from the MBJ Integrated Infrastructure Project, as it is only set to commence operations in 2H26 [[6]].

Geo Energy remains well-positioned amid strong seaborne coal demand, cost-efficient production, and strategic infrastructure investments that enhance long-term profitability. Despite an 18% year-over-year revenue decline in FY24, the company’s focus on cost optimization and infrastructure expansion strengthens its competitive position. The company offers an attractive 3.4% dividend yield, supported by strong free cash flow generation and disciplined capital allocation. With low leverage and a solid balance sheet, Geo Energy maintains financial flexibility to pursue expansion while mitigating industry risks [[6]].

Given its resilient business model, cost leadership, and expansion plans, KGI Securities maintains an OUTPERFORM rating, reinforcing Geo Energy as an attractive investment in the coal sector amid sustained China-driven coal demand and stable long-term pricing trends [[6]].

Financials

Here’s an overview of Geo Energy’s financials:

YE 31 Dec	2023	2024	2025F	2026F	2027F
INCOME STATEMENT (US\$)
Revenue*	488,974,701.0	401,898,621.0	517,896,000.0	774,836,580.0	900,873,750.0
Cos t of s a l es	(409,741,264.0)	(349,253,685.0)	(389,636,800.0)	(543,470,280.0)	(612,495,000.0)
Gross Profit	79,233,437.0	52,644,936.0	128,259,200.0	231,366,300.0	288,378,750.0
Other i ncome	34,345,456.0	28,129,877.0	36,252,720.0	54,328,522.9	63,165,758.4
Genera l a nd a dmi nis tra tive expens es	(22,092,955.0)	(22,202,004.0)	(23,305,320.0)	(34,867,646.1)	(40,539,318.8)
Other expens es	3,277,752.0	1,966,077.0	1,448,181.0	1,191,240.4	1,065,203.3
Profit from Operations	94,763,690.0	60,538,886.0	142,654,781.0	252,018,417.3	312,070,392.9
Fi na nce i ncome/(expens es )	(5,556,033.0)	(17,388,864.0)	(16,416,531.4)	(15,535,136.8)	(14,633,794.1)
Profit before Tax	89,207,657.0	43,150,022.0	126,238,249.6	236,483,280.4	297,436,598.8
Income ta x	(26,464,458.0)	(5,890,241.0)	(27,341,145.8)	(51,218,421.3)	(64,419,915.8)
PATMI	62,743,199.0	37,259,781.0	98,897,103.8	185,264,859.1	233,016,683.0
BALANCE SHEET (US\$)
Ca s h a nd ca s h equi va l ents	135,804,104.0	118,073,057.0	204,326,442.6	272,511,902.2	376,113,117.7
Tra de a nd other recei va bl es	75,731,896.0	113,021,404.0	79,955,682.4	98,646,382.5	114,692,489.8
Inventory	46,362,342.0	34,359,717.0	33,317,347.4	43,936,141.4	49,516,354.3
Other current a s s ets	48,257,707.0	52,193,008.0	34,171,457.6	38,664,557.9	44,953,847.3
Current Assets	306,156,049.0	317,647,186.0	351,770,929.9	453,758,984.0	585,275,809.1
Property, pla nt a nd equi pment	444,292,288.0	484,604,230.0	472,174,726.0	453,578,648.1	431,957,678.1
Other non-current a s s ets	186,919,386.0	215,614,213.0	199,655,105.0	195,137,645.5	189,863,963.0
Non-current Assets	631,211,674.0	700,218,443.0	671,829,831.0	648,716,293.6	621,821,641.1
Total assets	937,367,723.0	1,017,865,629.0	1,023,600,760.9	1,102,475,277.6	1,207,097,450.2
Tra de a nd other pa ya bl es	95,173,713.0	133,320,613.0	107,441,434.4	149,860,656.0	168,894,060.8
Borrowings (current)	15,512,186.0	5,743,162.0	41,976.0	86,768.0	109,164.0
Other current l i a bi l i ties	11,942,784.0	20,793,764.0	70,451,203.3	48,172,305.6	33,747,941.3
Current Liabilities	122,628,683.0	159,857,539.0	177,934,613.8	198,119,729.6	202,751,166.1
Borrowings (non-current)	8,246,487.0	83,952.0	173,536.0	218,328.0	240,724.0
Other non-current l i a bi l i ties	306,888,130.0	317,922,427.0	251,085,733.7	207,812,641.0	179,594,098.4
Non-current liabilities	315,134,617.0	318,006,379.0	251,259,269.7	208,030,969.0	179,834,822.4
Sha reholders equi ty	202,389,629.0	218,209,787.0	218,209,787.0	218,209,787.0	218,209,787.0
Non-control l i ng i nteres ts	297,214,794.0	321,791,924.0	376,197,090.5	478,114,792.0	606,301,674.7
Total Equity	499,604,423.0	540,001,711.0	594,406,877.5	696,324,579.0	824,511,461.7
Total Liabilities and Equity	937,367,723.0	1,017,865,629.0	1,023,600,760.9	1,102,475,277.6	1,207,097,450.2
CASH FLOW STATEMENT (US\$)
Net i ncome before ta x	89,207,657.0	43,150,022.0	126,238,249.6	236,483,280.4	297,436,598.8
Depreci a tion & non ca s h a djus tments	(65,566,577.0)	7,904,790.0	22,774,517.6	(4,689,821.2)	(13,751,171.8)
Cha nge i n Worki ng Ca pi ta l	(19,320,001.0)	20,607,185.0	37,175,077.5	44,299,911.5	40,903,917.0
Income Ta x Pa i d	(55,020,738.0)	(17,764,802.0)	(27,341,145.8)	(51,218,421.3)	(64,419,915.8)
Interes t Pa i d	5,102,175.0	16,821,748.0	16,416,531.4	15,535,136.8	14,633,794.1
CF from operating activities	(45,597,484.0)	70,718,943.0	175,263,230.3	240,410,086.2	274,803,222.3
Purcha s e/Di s pos a l of PPE	(5,997,179.0)	(10,026,008.0)	(5,178,960.0)	(7,748,365.8)	(9,008,737.5)
Other CFI	(181,970,628.0)	(39,090,707.0)	0.0	0.0	0.0
CF from investing activities	(187,967,807.0)	(49,116,715.0)	(5,178,960.0)	(7,748,365.8)	(9,008,737.5)
Dividends Pa i d	(56,406,315.0)	(10,382,843.0)	(44,491,937.3)	(83,347,157.6)	(104,829,800.3)
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