KGI Research Singapore

Singapore's leading broker offering Futures, FX, Equities and Wealth Management.

Golden Energy and Resources (GER SP)

Company Update: 20 March 2023

Better offer and better take it

The all cash consideration option is revised upward by 15% from S$0.846 to S$0.973. To break down, the first component which is the cash alternative price increases by 18% to IDR6,500, which will be paid in SGD based on a fixed SGD/IDR:1/11,432.09 exchange rate, and the second component which is the exit offer price increases by 13% to S$0.181.

The GEMS shares consideration and cash option is down a bit to S$0.964 from the previous S$1.045 due to the change in the market price of GEMS shares. Meanwhile, the exit cash offer is the same as the all cash consideration option, which is S$0.181.

Analyst view

Golden Energy and Resources delivered a phenomenal performance in FY22 due mainly to the favourable coal prices which benefited from the Russia-Ukraine military conflicts. The share price jumped approximately 170.0%, marking one of the top-performing stocks in the Singapore market.

All cash consideration option is preferred

Given the current macro environment, it is better for investors to keep cash from a prudent perspective. Moreover, the all cash option returns shareholders at a higher gain, compared to the other option which exposes them to liquidity and FX risks.

Shareholders better take the second chance to realise profits

Firstly, the outlook for coal will not be as good as it was last year. Besides the Russia-Ukraine military conflict which is a non-recurring factor, China’s recovery is gloomy. Coal like most hard commodities is cyclical. China’s demand plays a decisive role in its pricing. Referring to Figure 3, coal’s cycle lags China’s credit cycle by 12-15 months. China’s credit stimulus peaked in 3Q22, and hence, coal is expected to go back to a downward trajectory moving forward. In fact, coal prices did peak in the middle of 2022.

Secondly, the S$0.973 offering price is above the highest price ever since the reverse take-over in 2015 and compared to other recent price revisions, GEAR’s 15% increase is one of the highest. Current shareholders who may or may not take the previous placements (S$0.67 and S$0.305) will not be subject to losses.

Finally, the coal sector is out of favour in the long term when ESG investment is increasingly popular and perceived by institutions. Fewer investors lead to lower liquidities, and shareholders will be more difficult to cash out.


S$0.973 is a better price for shareholders to exit. There are always better opportunities to generate alpha.

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