By Say Cheong //
October 14, 2021

There has been a dearth of energy across major countries across the world. China, India, UK, and some countries in Europe are facing major energy shortage. This is driven mostly by logistical problems on the upstream energy producing commodities – Thermal Coals, Oil and Natural Gases.

Energy which is needed in our everyday lives, and also across heavy industries have driven up the demand for these commodities.

Oil prices have went back up to $80, while Natural gases have increased 5 fold across the year. Producers of these commodities are having bonanza of a year. Back in SGX, there are also companies listed that are enjoying this ride up.

We have identified 3 energy production companies that are powering up the economic recovery.

Energy Stock#1 – Geo Energy Resources

Geo Energy has four mining concessions located in South and East Kalimantan. Currently, Geo is actively operating two mines: SDJ and TBR. Geo has recommenced its mining operations at BEK while Geo is planning to start further exploration at STT.

The focus of its coal sales remains on Indonesia and China as core markets. Geo Energy has also scaled up its presence in other markets such as South Korea, Vietnam and Pakistan. The total coal sales in 2020 was 10.7 million tonnes, which is 45% higher than previous year.

As of its latest quarterly report, Geo’s revenue increased by 37% to USD 220.3 million. Its net profit decreased by 27% to USD 48.5 million. The drop in net profit was not operational based as previous year’s quarter had a much higher other forms of income arising from non-operational transactions.

Free Cash Flow came in at USD 46.9 million whilst cash and cash equivalents are at a good level of USD 79 million.

Geo’s stock last closed at $0.38, which represented a 100% YTD increase as it started off the year with $0.19. Thermal coals are still a major portion of energy producing commodities mix in developing nations such as Vietnam. Moreover, the ban of Australian coals in China have further boosted demand for Indonesia Thermal Coals.

Geo Energy last closed at $0.38, which valued the company at a P/E ratio of 5.14x and a 5.07% dividend yield.

Energy Stock#2 – Sinostar PEC

Sinostar is one of the largest producers and suppliers of downstream petrochemical products within the 400km radius of our production facilities within the Dongming Petrochem Industrial Zone in Dongming County of Shandong Province, PRC.

Located within the Zhongyuan Oilfield – one of the PRC’s largest oil fields, rich in energy resources and connected by a comprehensive logistics network, Sinostar’s strategic placement permits us to hand out to the nearby populous and industrialised provinces such as Shandong, Henan, Anhui, Shanxi, Shaanxi, Sichuan, Hebei, Hubei and Zhejiang.

As of its latest quarterly report, Sinostar’s revenue increased by 23% to RMB 960.4 million. Its net profit impressively turned positive to RMB 74.3 million.

The group’s free cash flow came in at RMB 75.4 million and as a cash and cash equivalents remains at a healthy level of RMB  367.6 million.

Sinostar’s stock last closed at $0.32, which represented a 113% YTD increase as it started off the year with $0.165.

Oil has experienced an almost straight upwards price movement since the start of the year. Coupled with current energy crisis in China, it will no doubt still be at its current high levels, thus supporting Sinostar’s business.

Sinostar last closed at $0.32. This values the company at a P/E of 3.56X and a dividend yield of 1.56%.

Energy Stock#3 – Rex International Ltd

Rex International Holding Limited  is an oil exploration and production  company listed on Singapore Exchange Securities Trading Limited’s Catalist Board.

The Company de-risks its portfolio of exploration and development assets using its proprietary liquid hydrocarbon indicator Rex Virtual Drilling technology, which can pinpoint the location of oil reservoirs in the sub-surface using seismic data.

Since the Company’s listing in July 2013, the Group has achieved four offshore discoveries, one in Oman and three in Norway. The Group also offers Rex Virtual Drilling screening services to other oil exploration companies as an additional tool to increase the success rate of finding oil

As of its latest half report, Rex’s revenue increased by an astounding 420% to USD 75.8 million. Its net profit turned positive and registered USD 27.7 million.

Free cash flow came in negative. Cash balance of the company as a remains on a sustainable level of USD 18.9 million.

Rex’s stock last closed at $0.285, which represented a 82.12% YTD increase as it started off the year with $0.15.

With oil market tearing upwards everyday, Rex has benefitted greatly, evidently from its positive results above. Since Rex sells its exploration assets and with current high oil prices and relatively positive outlook stretching to next year will no doubt help its sales, thus driving its bottom line.

Rex last traded at $0.285, which valued the company at a P/E ratio of 8.41x and no dividends were announced.

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