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Stanmore is up 40% today after announcing the right issue fully backed by GEAR and Institutional investors. At current price Stanmore has a market cap of AUD470M and GEAR is owning 75%, together with the 60% in GEMS, GEAR should be valued at SGD2B, this implies a share price of 88c.
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06-04-2022, 02:33 PM
(This post was last modified: 06-04-2022, 09:52 PM by valuebuddies.
Edit Reason: BMC revenue corrected as USD375M
)
There are 2 coal miners in SGX, GEAR and Geo Energy, its obvious that I favour GEAR than Geo with some straight forward reasons:
- GEAR has 12M tonnes of Australian metallurgical coal production (via 64% in Stanmore and its 80% in BMC)
- Geo has no Australian metallurgical coal
- GEAR has 36M tonnes of Indonesia thermal coal production (via 60% owned GEMS)
- Geo has 12M tonnes of Indonesia thermal coal production
- GEAR has 200oz AU production in Australia (via 50% owned Ravenswood)
- Geo has no exposure to AU
- GEAR two largest subsidiaries are listed, and GEAR's ownership in these 2 subsidiairies are valued at SGD2.6B at current share price
- Geo has no listed subsidiaries
One can see that GEAR is much bigger in size (even after the NCI interests) and is diversified comparing to GEO. But will GEAR's valuation of SGD1.4B justified when Geo is being valued more than SGD700M?
Most recently, the Australian premium HCC prices went rollercoaster to USD650/t before falling sharply to ard USD450/t. Is this something we need to be worry about when this price is still a few fold higher than a year ago? BMC made USD375M revenue between July to Sept 2021, which is based on appx 2.5M tonnes at USD150/t. So the price now is still very lucrative. The sales is due for completion in early May, by then BMC would be selling its coal probably on above USD500/t (given the lag effect between the heading prices and realised contract prices).
On Indonesia, thermal coal prices remain high at near USD100/t, the average price for Q4 2021 and Q1 2022 looks about the same from the chart, maybe ranging about USD80/t to USD90/t in average. These are the record high in ICI 4 prices since 2014 (i have no record prior to 2014 but it was below USD40/t in 2014). So for GEMS, likely that these record prices will be reflective in the upcoming Q1 2022 earnings. If you love dividend, do seriously consider GEMS.
For Ravenswood, my view hasn't been changed, when inflation comes, gold will rise in price. I can't convience you if you are a crypto believer, in the history of mankind, gold and silver are the only currencies that survives against all fiats. Ravenwoods's expansion is due to be completed in the next months, its website has also posted a numerous job vacancies since Feb 2022. At pressent gold price, I expect GEAR's share of profits from Ravenswood would be about USD50-60M a year post expansion, which is rather insignificant now comparing to how much it will make from the coal business.
Well I must emphasize that the coal prices today is not primarily due to the Ukraine war, its largely due to the increasing demand and declining exploration. It is anticipated that the coal and energy prices will fall further once the war ends, but I hope and pray for peace to Ukrainian and to the world.
Conclusion, is it still good time to buy GEAR now? Perhaps we wait until the half year result in August? Perhaps it's too late by then.
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thank you but how does one buy GEMS trading on Jakarta Stock Exchange? Brokers i check, like Interactive Brokers and SC, don't offer access. The local brokers may offer access but charges are very high.
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