22% Stock Rally for This Company on 1Q Profit and As 92 km Road Project Progresses

Geo Energy's stock price has risen 22% so far this year, aided by growing investor recognition of the potential fruits from its road-jetty project in Sumatra.

Also, the Singapore-listed mining group had signalled that 2025 sales volume (10.5 - 11.5 million tonnes) is targeted to be as much as 45% higher year-on-year.

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The first quarter of 2025 results: nearly double the coal sold (3.5 million tonnes), revenues up 68% to US$166.4 million, and net profit soaring 63% to US$14.1 million.

Coal prices remained healthy with an average selling price (ASP) of roughly US$47 (1Q24: US$54.7).

Production ramp, strip ratio, coal demand

So, what's driving this uptick in production?

Annual 30% dividend payout

Geo Energy declared an interim dividend of 0.25 SG cents per share, a 25% increase from last year's interim dividend.

While this translates to a 19% payout ratio for the quarter, management stressed their commitment is to a 30% dividend payout ratio on an annual basis.

In an investor briefing, management explained it was mainly advance overburden removal in 2024.

By doing this heavy lifting last year, it was easier to get the coal out now.

Unit production cost came down with the blended strip ratio across Geo Energy's mines, said CFO Adam Tan.

At SDJ and the key TBR mine, where mining is nearing its end in 3-4 years' time, the strip ratio will decrease, which will help lower production costs.

However, at the relatively untouched TRA mine in South Sumatra, where production is being ramped up to mine its massive coal resources, the strip ratio will increase over the next couple of years.

Potential cash cow

A major project Geo Energy is pushing forward with is the MBJ road, a 92-kilometre haul road.

This is a huge undertaking – almost twice the length of Singapore East to West.

Progress is looking good and the related jetty project is also progressing positively and is on schedule.

• The team is "working vigorously" on the 92-km road, said Chief Operating Officer Philip Hendry.

Work is happening "24 hours, three shifts, seven days a week", with completion targeted by June next year.

• Land clearing is about 65% done, and cut-and-fill is 8-10%.

• This is currently ahead of schedule. "Assuming we complete this by June next year it will be one of the fastest hauling road completion in the history of Indonesia," said Mr Hendry.

Still, asked what challenges had presented themselve, Mr Hendry cited "numerous local issues", despite the company having all the necessary permits and licenses.

Managing these interactions with local communities is an ongoing task, which is similar to what Geo Energy experiences when operating its existing mines.

Geo Energy sees the MBJ road as a potential cash cow, having received a lot of interest from parties wanting to take a stake or use the road.

Geo Energy has signed MOUs and term sheets but Geo Energy is not rushing into any deal.

The goal is to carefully select the "right party" as clients and partners, said Mr Hendry.

"Significantly undervalued"

NicholasYon 4.25 Interestingly, the road has a capacity for around 40-50 million tonnes per year, and Geo's own needs (mainly from the TRA mine) are about 25 million tonnes, leaving a good chunk for third parties.

For context, Geo Energy's sales volume from the TRA mine was 0.7 million tonnes in 1Q2025, or an annualised 2.8 million.

There's even potential to expand the road's capacity significantly, given that Geo Energy owns a 60-metre land width while the current road is only 14.5 metres wide, said Mr Hendry.

The company's current market capitalisation of US$400 million (S$509 million) looks significantly undervalued.

The earnings potential of the MBJ road alone, from internal cost savings and third-party usage, could result in around US$1 billion in valuation for the new infrastructure, as previously reported:

Revenue and EBITDA Drivers

Leasing income: Charging US$8–10 per tonne on 15 million tonnes/annum of third-party capacity yields roughly US$120–150 million in annual leasing revenue.
Logistics cost savings: Use of the road by Geo Energy cuts freight costs by up to US$10 per tonne on 25 million tonnes/annum, boosting TRA’s margin.
Aggregate cash flow: Combining leasing fees and internal cost savings drives an estimated US$300–400 million in EBITDA (earnings before interest, tax, depreciation and amortisation) each year.

Applying a conservative multiple of 3× to the enterprise values/EBITDA implies a total infrastructure value of ~ US$1 billion.

Geo Energy’s 63.7% stake in the project translates to roughly US$637 million (~$800 million) of that value.

And that's not counting the value of the coal produced from the mines.

On a short-term perspectiver, Geo is trading at ~6X this year's forecast earnings of analysts.

22% Stock Rally for This Company on 1Q Profit and As 92 km Road Project Progresses

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