SINGAPORE (Aug 16): RHB is maintaining its “buy” call on Golden Energy & Resources with 71 cents given it is one of the few listed coal companies that is aiming for a sizeable organic volume growth target.
“We think this is justified as we expect its ROAE (Return On Average Equity) to increase to more than 20% with a significant forecast production growth ahead,” says RHB in a Wednesday report.
Raden Utoro, Golden Energy Mines’ director, who has been instrumental in increasing the coal production of Kaltim Prima Coal – a coal mining company with one of the world’s largest open-pit mining – reiterated his target to reach the coal production target of 36 million tonnes in 2021 versus 9.5 million tonnes in 2016.
In 1H17, Golden Energy booked earnings (net of minority interest) of US$30.8 million, which was within RHB and consensus expectations.
“We believe its higher coal sales volume in 2H17F should catch up. Its interim dividend of 0.8 cent/share generates a dividend yield of 2.05%, which is higher than our expectations,” says RHB.
During the half year, Golden Energy achieved coal production volume of 6.01 million tonnes despite an extended monsoon season. It claims that it is on track to reach FY17F’s coal production target of 14 million tonnes, up 47.3% on year.
Golden Energy’s 1H17 coal production of 6.01 million tonnes is still 42.9% of its FY17F coal production target.
An interim cash dividend of 0.8 cent/share has been declared, which generates a dividend yield of 2.05%.
“The dividend yield from its interim dividend is higher than our expected dividend yield of 0.3%,” says RHB.
Meanwhile, net cash position is expanding. The company also has a healthy balance sheet. The proceeds from a ramp-up in its coal production has allowed GEAR’s net cash position to keep expanding to US$34 million ($46.5 million) in June from US$29 million in Dec 2016.
Main catalyst of the share price is the substantial earnings growth going forward due to a sizeable increase in coal production, says RHB.
As at 11.42am, shares in Golden Energy & Resources are trading at 39 cents.