Download the prospectus here
Geo Energy Resources Limited
Offer Price: $0.325
Offer Size: 258m new shares + 31m vendor shares
Public Tranche – 3m shares
Placement Tranche – about 286m shares
NAV per share (post-IPO): S$0.10
Historical PE: 16x (FY11)
Market Cap (post-IPO): S$376m
Open: 12 October 2012
Close: 17 October 2012, 12.00 noon
Trading: 19 October 2012, 9.00 a.m. (on “ready” basis)
Geo Energy Resources Limited (Geo Energy) are a Coal Mining Group
that commenced business operations in 2008 and has established track
record in the operation of coal production and coal sale in Indonesia.
The Coal producation operations are primarily located in Kalimantan, Indonesia.
As at the Latest Practicable Date, Geo Energy have been operating as a
(i) mine operator (operating coal mining sites owned by third party mine
ownersunder coal cooperation contracts awarded by the respective third
party mine owners);
(ii) mine owner cum operator (operating our own coal mining sites); and
(iii) mine contractor (providing specific mine contracting services to third
party mine owners).
To date, Geo Energy has successfully secured a total of eight (8) coal
cooperation contracts and produced approximately 2.6 million tonnes of coal
with caloric value ranging from 3,500 kcal/kg (GAR) to in excess of 5,500 kcal/kg
(GAR). In 2011, we obtained our own Mining Concession to undertake coal
production activities at the 4,570 ha BEK Concession Area located at Kutai
Barat Regency, East Kalimantan Province, Indonesia.
In February 2012, Geo Energy entered into our first mining contracting services
contractwith a mine owner, PT Borneo Mitra Sejahtera, pursuant to which our
Group shall provide overburden removal and coal hauling services for the mine
located at Kutai Kartanegara Regency, East Kalimantan, Indonesia
(”Borneo Mine”). Operations commenced in September 2012 and shall continue
throughout the economic life of the Borneo Mine.
Use of IPO Proceeds
My Personal View
Geo Energy IPO come at a very favourable time as we will see
the exit of Sakari very soon. Although Geo Energy is a very much
smaller company than Sakari, at least it will still be entering the
radar of many investors and traders to speculate and invest in'
the commodity and resources boom. Personally, I have some
concerns that I wish to highlight to the readers before they make
the decision to apply for the public tranche.
Firstly, it will be a pretty big stock market cap for the IPO after
listing. It will have a total share capital of 1,157,050,891 and
that is quite a big number of shares for a small company like
Geo Energy. It is worthy to also highlight that its NTA after
listing will be only 10cts and its IPO price is 32.5cts which is
3.25 times over the book value just before the debut and it will
get higher after listing should it open and stay higher than the
Next, do note that the directors and/or substantial shareholders
and the pre-invitation investors are paying very much lower
cost than the IPO investors. Refer to the table below for more info
Third, the company is having a negative current ratio before
listing, that is its Current Liability is more than the Current Asset.
It may face difficulties in meeting current obligations and
immediate debts should it run into a nasty situation. Although,
it will be reaping in about 78m in IPO proceed, the company
will not be using it to settle debts.
In conclusion, although there are fear and concerns about
the global economy slowdown and we are already seeing
coal price on the decline, the company is still confident of
strong demand from primarily China and India in the medium
to long term. The company is also optimistic that domestic
demand will continue to grow and that will a driving force
for the company's prospect.
I am in an unwelcome dilemma as to how much to apply for
the Geo Energy IPO as another IPO Religare Health Trust's
public application will close on 18 October noon. The money
returned from the Geo Energy IPO will not be available for
the next IPO. Given that there will be only 3 million shares for
application for Geo Energy and 12 million shares for Religare,
I will still SUBSCRIBE for Geo Energy but only at half strength
and leave the remaining for Religare Health Trust.