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Geo Energy pays interim dividend as earnings rise, eyes another acquisition

Chan Chao Peh Published on Tue, Nov 21, 2017 / 10:23 AM GMT+8

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(Nov 20): Geo Energy Resources has achieved a big improvement in profitability this year, on increased production at its coal mine in Indonesia as well as higher selling prices. And, production at its second mine could kick off next year. Now, confident that the coal sector is on a steady uptrend, the company is preparing to make some new investments.

“We have seen the worst of the bottom, and we are now going up,” says CEO Tung Kum Hon in an interview with The Edge Singapore. Last month, the company raised US$300 million ($407 million) in a new bond issue. About US$200 million will be used for an acquisition, which may be via some form of joint venture and may take place soon, according to Tung. The rest of the proceeds from the bond issue have been used to redeem an earlier tranche of bonds that matures in January.

“If this company holds US$200 million for a year, paying US$24 million interest on it, it is a very stupid company. You’d expect the company to invest the cash to generate better returns for shareholders,” Tung says. The bonds that Geo Energy has just issued have a coupon of 8% and mature in 2022. They are rated “B2” by Moody’s Investors Service, “B” by Standard and Poor’s Ratings Services and “B+” by Fitch Ratings.