TL;DR The firm's financials for 2018 look good, but they had worked since 2017. There is also a chance that the shares could be overvalued, but the growth prospect of the firm looks good.
Business Profile
Source: The Edge Singapore__** **
GEO ENERGY GROUP is a coal mining group, established since 2008, with offices in Singapore and Jakarta, Indonesia and production operations in Kalimantan, Indonesia. They are a low-cost coal producer with high-quality coal mining assets, working in collaboration with world-class business partners
Income Statement
For 2018, the profitability of the business looks fairly good. However, revenue and profits both had fallen over time as well. This had also resulted in the profitability of the business dropping over time. All in all, although margins looked good, the income statement had weakened.
Balance Sheet
The firm has quite a strong balance sheet. This can be seen from the high short-term liquidity of the firm, but also the low debt levels that they have. However, ehse metrics had worsened over time too, probably due to the firm taking on more debt. Still, the numbers look good.
Free Cashflow Analysis
Year on Year, free cash flow had dropped by almost half. This was caused principally by the drop in earnings even despite capital expenditures and working capital giving them more cash flow. Overall, this is a bad sign.
Despite the drop, the free cash flow as % of sales is still quite high at more than 20%. This is probably due to the strong working capital conditions that the firm has which allows it to generate more cashflows.
The company has quite a high dividend payout ratio of 0.54. However, with a high free cash flow to equity relative to dividends paid out, I do believe that the firm can sustain their dividends.
Efficiency Metrics
The firm is efficient based on the capital that investors had put into the firm, as displayed by ROIC. However, the firm seems inefficient on total assets. This is due to a lot of cash the company is holding. This is not a good sign, as it shows that the company could become more profitable and that these assets are not fully utilised. Based on their operating assets and resources through the ROC, the firm is quite efficient. In 2018, there was also very high reinvestment, which had reduced free cashflows too. But because of such high reinvestment, the firm is likely to have much higher earnings in the following years. The low return on equity is primarily due to the low asset turnover. As a whole, the firm seems to have also become less efficient over time.
Valuation
The shares of the firm could potentially be overvalued. When we look at the different multiples, the shares of the firm are trading more expensively. However, investors might have priced in growth premiums due to the higher reinvestment rate of the firm in 2018. This growth aspect can't be valued in the multiples. Additionally, the firm has a low beta of 0.12. This is a fairly healthy sign, as the cost of equity would be lower.
TL;DR The firm's financials for 2018 look good, but they had worked since 2017. There is also a chance that the shares could be overvalued, but the growth prospect of the firm looks good.
Business Profile
Source: The Edge Singapore__** **
GEO ENERGY GROUP is a coal mining group, established since 2008, with offices in Singapore and Jakarta, Indonesia and production operations in Kalimantan, Indonesia. They are a low-cost coal producer with high-quality coal mining assets, working in collaboration with world-class business partners
Income Statement
For 2018, the profitability of the business looks fairly good. However, revenue and profits both had fallen over time as well. This had also resulted in the profitability of the business dropping over time. All in all, although margins looked good, the income statement had weakened.
Balance Sheet
The firm has quite a strong balance sheet. This can be seen from the high short-term liquidity of the firm, but also the low debt levels that they have. However, ehse metrics had worsened over time too, probably due to the firm taking on more debt. Still, the numbers look good.
Free Cashflow Analysis
Year on Year, free cash flow had dropped by almost half. This was caused principally by the drop in earnings even despite capital expenditures and working capital giving them more cash flow. Overall, this is a bad sign.
Despite the drop, the free cash flow as % of sales is still quite high at more than 20%. This is probably due to the strong working capital conditions that the firm has which allows it to generate more cashflows.
The company has quite a high dividend payout ratio of 0.54. However, with a high free cash flow to equity relative to dividends paid out, I do believe that the firm can sustain their dividends.
Efficiency Metrics
The firm is efficient based on the capital that investors had put into the firm, as displayed by ROIC. However, the firm seems inefficient on total assets. This is due to a lot of cash the company is holding. This is not a good sign, as it shows that the company could become more profitable and that these assets are not fully utilised. Based on their operating assets and resources through the ROC, the firm is quite efficient. In 2018, there was also very high reinvestment, which had reduced free cashflows too. But because of such high reinvestment, the firm is likely to have much higher earnings in the following years. The low return on equity is primarily due to the low asset turnover. As a whole, the firm seems to have also become less efficient over time.
Valuation
The shares of the firm could potentially be overvalued. When we look at the different multiples, the shares of the firm are trading more expensively. However, investors might have priced in growth premiums due to the higher reinvestment rate of the firm in 2018. This growth aspect can't be valued in the multiples. Additionally, the firm has a low beta of 0.12. This is a fairly healthy sign, as the cost of equity would be lower.