Time & date: 9 am, 29 April 2014.Venue: Pan Pacific Singapore.
At Geo Energy's AGM reception, renowned investor Jim Rogers (who is also the company's Non-executive Director) addresses minority shareholders' questions.
Photos by Sim Kih
"Coal mining players need to accumulate coal reserves just like property players need to accumulate land bank," said Chief Investment Officer Mark Zhou.
"Coal mining players need to accumulate coal reserves just like property players need to accumulate land bank," said Chief Investment Officer Mark Zhou.
COAL PRICES have been declining for the past 3 years, from close to US$140 per metric ton (Aussie thermal coal for price reference) to less than US$90 currently.
Even though the profitability of Geo Energy Group has been affected, the business down cycle is in fact opportunity for accumulation of coal mining reserves, said its Chief Investment Officer (CIO) Mark Zhou at the AGM.
In FY2013, Geo Energy acquired BEK Mine and increased its coal production by 55% to reach 1.49 million tonnes.
The production ramp-up was the fruit of its capital expenditure to expand its mining fleet from 186 vehicles to 236 over FY2013.
Even though the profitability of Geo Energy Group has been affected, the business down cycle is in fact opportunity for accumulation of coal mining reserves, said its Chief Investment Officer (CIO) Mark Zhou at the AGM.
In FY2013, Geo Energy acquired BEK Mine and increased its coal production by 55% to reach 1.49 million tonnes.
The production ramp-up was the fruit of its capital expenditure to expand its mining fleet from 186 vehicles to 236 over FY2013.
The fleet comprises of a comprehensive range of vehicles ranging from articulated trucks, dump trucks, hauling trucks, excavators, bulldozers to wheel loaders.
It also did well in other segments: overburden removal as well as coal sales. Trading volumes were also higher.
The company had increased FY2013 revenue by 38% to reach US$108.6 million, but gross margins declined due to the drop in coal prices.
L-R: Chief Financial Officer Tan Cheang Shiong | Chief Investment Officer Mark Zhou | Independent Director Ong Beng Chye | Executive Director Huang She Tong | Executive Chairman Charles Antonny Melati | Non-executive Director Jim Rogers | CEO Dhamma Surya | Independent Director Lu King Seng | Independent Director KaryonoMr Zhou also highlighted that Geo Energy has the following investment merits.
1) Profitability relative to peers
Even though its FY2013 net profit was down 32% year-on-year, its coal mining business in Indonesia was still profitable, unlike some of its peers.
For example, Indonesian coal mining players like Indika Energy and Atlas Resources have been incurring losses, while Geo Energy posted a net profit of US$13.0 million and net profit margin of 12% in FY2013.
2) Low Gearing
Total debt to total equity was only 0.2x. This arose as the company chose to take loans to aggressively pay down its expenditure on heavy mining equipment (over 3 years).
Even though its FY2013 net profit was down 32% year-on-year, its coal mining business in Indonesia was still profitable, unlike some of its peers.
For example, Indonesian coal mining players like Indika Energy and Atlas Resources have been incurring losses, while Geo Energy posted a net profit of US$13.0 million and net profit margin of 12% in FY2013.
2) Low Gearing
Total debt to total equity was only 0.2x. This arose as the company chose to take loans to aggressively pay down its expenditure on heavy mining equipment (over 3 years).
The board of Geo Energy at its AGM.|
Below is a summary of questions raised by shareholders at the AGM and the answers provided by the management. The current environment of soft coal prices creates opportunities for the accumulation of coal reserves.
We need to conserve internal financial resources to be in a position to increase our coal reserves bank when the opportunity arises. Our earnings visibility is dependent on the availability of coal reserves. Q: Your share price has come down significantly over the past year. Do you intend to buy back shares? We don't have a share buyback program in place but we may consider it in the future.
Q: Do you intend to diversify into other businesses?
We remain focused on coal mining in Indonesia for now. We will seek shareholders' approval before venturing into other businesses.
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