SINGAPORE (Nov 22): Phillip Securities Research is keeping its “buy” call on Golden Energy and Resources (GEAR) with an unchanged target price of 59 cents on the back of a buoyant coal price and healthy sales.
GEAR saw its earnings grow 46.6% to US$9.9 million ($13.4 million) in the 3Q ended September as revenue surged 83.7% to US$179.3 million, fuelled by an increase in both production volume and average selling price.
However, operating costs came in higher than expected, mainly due to the rise of freight expenses resulting from higher sales volume and increased marketing expenses from the expansion of coal sales beyond the domestic market.
“Revenue exceeded our expectation by 10% due to higher average selling price (ASP), but net profit missed our expectation by 20% due to higher operating costs and income taxes,” says Phillip analyst Chen Guangzhi in a Tuesday report.
The higher-than-expectation operating costs leads the research house to cut GEAR’s estimated earnings per share (EPS) in FY17 to 2.8 US cents, from 3.1 US cents previously. EPS forecast for FY18 remains unchanged at 4.3 US cents.
“The coal price remains buoyant as of now,” says Chen, noting that the coal price has surged to a year-to-date high of US$49.9 per tonne as at October.
Looking ahead, GEAR is also expected to see a ramp-up in production in FY18 with the kick-starting of operations at the BSL mine. According to Chen, production volume is on track for 14 million tonnes in FY17, and could surpass 18 million tonnes next year.
“Furthermore, it has been actively seeking inorganic growth, which is not limited to coal business but would include precious metal businesses,” Chen adds.
As at 1.02pm, shares of GEAR are trading 1.5 cents higher at 41 cents, implying an estimated price-to-earnings ratio of 7.2 times for FY18.
