Company News

Sim Lian Group has been awarded a contract of $88m by Housing and Development Board for proposed building works at Jurong West. The contract comprises the construction of 5 blocks of residential building with 528 dwelling units, 1 multi-storey carpark and other communal facilities. The contract period is 36 months.

Geo Energy Resources expects to report a lower profit in 1Q14 as compared to the corresponding period in 2013. The Group continued to experience weak coal demand and a downward trend in global coal prices.

Loyz Energy has successfully completed its purchase of stakes in three onshore petroleum concessions in Thailand. Its 20% stake in 3 Thailand onshore concessions will see immediate returns and positive cashflows, effective April 2014. Gross production rate rose from 1,200 bopd in February 2014 to 3,000 bopd in early April 2014, and is expected to surge to 4,000 bopd by May 2014. Growing recurrent income from these producing fields will enable the Group to invest in other strategic concessions.

Geo Energy growth comes with significant downside risks

Geo Energy Resources (GER) is an Indonesian coal miner operating the PT Bumi Enggang Khatulistiwa (BEK) coalmine in East Kalimantan. GER plans to expand coal production from an annual average of 0.6mn tonne during 2009-2011, to an annual average of 2.4mn tonne during 2012-2017. In addition, supported by rise in forecast coal prices, we estimate GER to report 27% EPS CAGR over 2011-14f. However, the earnings growth comes with significant downside risks. We value GER at 25% discount to its peers and initiate coverage with SELL rating. Our TP of S$0.34 is 18% below the current price level.

Strong earnings growth profile: We expect GER to deliver 27% EPS CAGR during 2011-2014f, driven by: 1) growth in coal production from 0.7mn tonne in 2012f to 2.5mn tonne in 2014f;

2) increase in average sales price from US$46.8/tonne in 2012f to US$49.4/tonne in 2014f; and 3) 275bps expansion in net margin between 2011-2014f driven by strong cost control.

But growth entails significant downside risks: The coal mining business will account for 67%-75% of the gross profit during 2012f-2014f and we see the following downside risks to this business: