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Sunday, 7 October 2012

Geo Energy Group (Preview)

Geo Energy Group ("Geo" or the "Company") is a coal mining specialist company based on Kalimantan, Indonesia.

Geo own and operate coal mine and sell coal and as of 31 Dec 2011 it has proven reserves of 4.2m tonnes and probable reserves of 8.3m tonnes. The Company recorded revenue of US$69m and profit of US$14.3m in FY2011 based on its audited figures.

It is interesting to know while Sakari is in the midst of being delisted, there is another coal company trying to get listed back on SGX.

I am not going to do a detailed analysis, so once again, this is a "off-the-cuff" kind of comments.

Many Coal Companies in Indonesia?

There are many coal companies in Indonesia and I have seen quite a number trying to get listed here. However, the issue about coal in Indonesia is not about its availability but the cost of extracting the coal and transporting it. Many coal pits are basically not 'viable' because it is just too costly to transport it. If the coal price moved up significantly, i think the supply of coal will also move up in tandem due to the abundance of coal supply in Indonesia and elsewhere in the region.

Declining Coal Prices?

I goggle and found this chart. Not a chart that will excite or instill a lot of investors' confidence. This article seemed to indicate that all is not well for the coal industry in Asia.

Price seemed to be trending downwards and this will not bode well for the Company. It is interesting the company choose to present a chart below from 2009 instead of a 5 year chart :P

Vendors are selling

Not exactly very exciting to see insiders cashing out at the IPO. Are they expecting IPO investors to provide a liquidity event or exit for them?

"No dividend" policy

The current trend right now is for IPO companies to pay a certain % of its profit as dividends to shareholders for current and next year. I don't think there is any intention for GEO to pay any dividends. Company seemed to be profitable but are not willing to share the profits?

Here you go. My off the cuff preview. You decide for yourself if it is worth subscribing to and i will provide a more detailed update when the prospectus is out (if it is registered).

Happy IPOing.

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