Geo Energy expects ‘substantial’ rise in Q3 net profit; shares up 8%

[SINGAPORE] Integrated coal mining group Geo Energy Resources expects a “substantial increase” in third-quarter net profit due to higher sales volumes, higher selling prices and “significant” logistics cost savings from subsidiary Marga Bara Jaya (MBJ).

Its profit guidance on Monday (Sep 28) comes as coal continues to gain popularity in South-east Asia, with the region tapping the commodity for 47 per cent of its power generation in 2024, up from 37 per cent in 2015.

Shares of Geo Energy rose as much as 9.7 per cent, climbing S$0.055 to S$0.62 as at 3.27 pm. The counter later pared some gains to end the day 8 per cent up at S$0.61.

The group on Monday also said that it and Resource Invest (ResInvest) have made “good progress” in discussions for the Swiss private commodities investment company to take a US$1.5 billion “substantial” stake in MBJ. A term sheet was signed in May.

MBJ is a Geo Energy-owned Indonesian infrastructure and logistics company that develops and operates integrated coal transportation networks in South Sumatra. Geo Energy and ResInvest in May targeted an initial investment in Q3 2026, with the remainder in Q1 2027.

The transaction also relies on the entry into a new marketing joint venture between Geo Energy and ResInvest Commodities (RIC). RIC is a subsidiary of ResInvest and already serves as the coal offtaker for Geo Energy’s Triaryani coal mine.

Net profit surge

Geo Energy expects its third-quarter sales volume to weigh in at about 3.3 million tonnes of coal sold. The company sold 3.6 million tonnes of coal in the previous two quarters combined.

Higher coal prices at US$76 a tonne – nearly US$20 a tonne higher than the average of US$58.13 a tonne in H1 – are also expected to drive net profit up, as are lower operating costs.

This comes after the use of MBJ’s road and jetty infrastructure has “significantly” reduced the operational cash costs by about US$11 a tonne on the tonnage delivered through the Indonesian unit.

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Coal production and sales are projected to rise further in Q4 as the Triaryani mine scales up volumes through the MBJ infrastructure. This will follow its completion and the commencement of its operations using double-trailer haulage from October. This should result in “corresponding increases in cost savings”, said Geo Energy.

Full-year profit is also expected to increase “substantially”, assuming coal prices remain at about US$77 a tonne and Triaryani coal volume continues to ramp up as planned.

Geo Energy added that it intends to distribute at least 30 per cent of the group’s net profit as dividends.

The company also gave an update on its share buyback programme, which started in July as part of its long-term capital management. Geo Energy has thus far bought back 5.8 million shares and intends to continue conducting further buybacks, especially if its shares “continue to be undervalued”.

Philips Securities on Aug 31 set a S$0.75 target price for Geo Energy’s shares with a “buy” recommendation.

Meanwhile, KGI Securities on Sep 2 set a target price of S$1.15 – a reduction from S$1.27 previously – and an “outperform” rating.