Company Update: Geo Energy Resources Ltd (GERL SP/RE4.SI)
Company Update: 10 June 2025
Sales volume doubled in the first quarter
- Strong first quarter sales volume. Geo Energy reported a 94% YoY surge in sales volume to 3.5Mt, driving revenue to US$166.4mn and net profit to US$14.1mn, despite softer ICI4 coal prices. Its cash profit margin dipped to US$11.16/tonne, reflecting pricing pressures. However, with no major debt and a strong balance sheet, the company remains well-positioned for future growth.
Infrastructure Expansion to Boost Margins
The US$150mn MBJ Integrated Infrastructure Project remains on track for completion by 1H26. The project includes a 92km hauling road and jetty, which is expected to reduce transportation costs by over US$10/tonne and double production capacity to 25Mt per year. Additionally, third-party leasing of the infrastructure will create new revenue streams, enhancing long-term cash flow and profitability.
1Q25 Financials Update: Improved Efficiency Leading to Jump in Sales Volume
Geo Energy reported 1Q25 revenue of US$166.4mn, a 68% YoY increase from 1Q24 revenue of US$99.0mn due to an increase in production and sales volume, offsetting the decline in average selling price. Net profit rose 63% YoY to US$14.1mn. Its cash profit declined from US$13.18/tonne to US$11.16/tonne. The company’s focus on operational efficiency and infrastructure development positions it well to capitalize on future demand growth. With a US$79.9mn cash balance, Geo Energy maintains financial flexibility for future investments. The 0.25 S-cent per share interim dividend is 25% higher YoY and implies a dividend payout ratio of 19%, the company maintains committed to its dividend policy of 30% for the full year, reinforcing management’s confidence in long-term growth.
Valuation & Action
We maintain an OUTPERFORM rating with a lowered target price of S$0.69, based on a discounted cash flow (DCF) valuation using a weighted average cost of capital (WACC) of 11.5%.
Risks
Global coal price volatility, evolving energy landscapes, weather uncertainties, infrastructure project delays and potential execution risks affecting production.
