SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

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Equity Bottom-Up

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More than a decade ago, Indonesian entrepreneur Charles Antonny Melati pivoted from property and manufacturing into coal, after noticing a gap in the country’s power generation market. 
“My interest in Indonesia’s coal industry was piqued initially by the frequent power outages and undersupply of electricity in the country,” said the Founder and Executive Chairman of SGX-listed coal producer Geo Energy Resources Ltd.  
At the time, coal was one of the cheapest sources of energy available. The Indonesian government had also announced the first phase of its Fast Track Program in 2006, which aimed to add 10,000 megawatts (MW) of coal-fired energy by 2010.  
“Being a businessman, I started looking for a coal mine to capitalise on this opportunity,” recalled Melati. “In 2008, I entered a joint venture with a company that owned a coal mine. Two years later, my team and I identified viable cost-competitive coal assets and Geo Energy was founded.” 
The growth of Geo Energy in the subsequent years was marked by several significant milestones. They included the Group’s listing on SGX Mainboard in 2012, securing its first mining concession in 2015, transitioning from a coal mining services provider to coal producer the following year, and obtaining its second mining concession in 2018. 
“It has definitely not been easy to build this company from scratch, but the journey has been full of memorable highlights. The learnings over the years have also made it totally worthwhile,” Melati pointed out.  
Lessons along the way included managing stakeholder expectations, educating the market on the viability and future of coal, and now, with the rise of Environment, Social and Governance (ESG) concerns, assuring investors that Geo Energy is able to transition to a sustainable and environmentally responsible business despite being in the fossil fuel industry. 
“I hope to learn and improve continuously as Geo Energy progresses on this journey, and at the same time, give back to society, based on my personal lessons and experiences,” he added. 
Today, Geo Energy is a major Indonesian coal producer with an established track record in operating coal mines, coal production and selling coal throughout the region. It aims to become one of Indonesia’s top 10 coal producers. 
The Group owns four mining concessions in South and East Kalimantan. It actively operates two mines - PT Sungai Danau Jaya (SDJ) and PT Tanah Bumbu Resources (TBR). It has re-started mining operations at PT Bumi Enggang Khatulistiwa (BEK), and plans to commence further exploration at PT Surya Tambang Tolindo (STT).  
While Geo Energy’s coal sales remain focused on Indonesia and China, it has scaled up its presence in other markets such as South Korea, Vietnam and Pakistan. Total coal sales in 2020 reached 10.7 million tonnes, up 45% from the previous year. 
The Group was awarded one of Singapore’s Fastest Growing Companies in 2019 and 2021 by The Straits Times and Statista, based on its strong revenue growth. Stringent Cost Controls 
Looking ahead, Geo Energy remains focused on monitoring and controlling its costs to maximise cash profits from coal sales, Melati said.  
“Indonesian coal prices came under pressure at the start of 2020 due to COVID-19. We knew we had to make our business model more resilient to ensure we remain sustainable and profitable, so we leveraged on long-standing working relationships with our service providers to lower production costs during the pandemic,” he added. 
“We negotiated to keep our costs in tandem with coal prices. When coal prices recover, these costs will adjust upwards, as we share some of the upside with our service providers, and vice versa. This was how we reduced our production costs and delivered superior financial results in the first quarter of 2021.” 
For the three months ended 31 March 2021, Geo Energy’s operating profit surged to US$39 million - the highest in a quarter - from US$7 million in 1Q 2020, while production cash costs fell by 14% to US$23.14 per tonne. 
For now, industry prospects remain bright. The average ICI (Indonesia Coal Index) 4 price has been gaining since late last year - from US$31.07 per tonne in 4Q 2020 to US$41.84 per tonne in 1Q 2021, and US$63.98 on 2 July 2021. 
Demand for the fossil fuel is set to gain 4.5% this year, driven by soaring electricity demand, according to the International Energy Agency. 
Data analytics firm GlobalData has also forecast worldwide coal output to expand at a compound annual growth rate (CAGR) of 2.3% between 2021 and 2025, to reach 8.8 billion tonnes in 2025. China and India are at the forefront of this accelerating demand, and account for two-thirds of global coal consumption.  
“This increasing demand, along with higher prices, lends a positive outlook to our business, as Indonesia is expected to lead the way, being one of the largest net exporters of coal, and on the back of the trade dispute between China and Australia,” Melati noted. 
Expecting solid demand, Indonesia’s Ministry of Energy and Mineral Resources (MEMR) has raised the national coal production target for 2021 by 75 million tonnes to 625 million tonnes. 
“This gives us the opportunity to apply for an increase in production quotas for our SDJ and TBR mines,” he added. “If approved, we would have a higher production target in 2021 during this period of rising coal prices.” Managing Price Volatility 
Nonetheless, coal price risk remains a challenge that must be managed, Melati admitted. 
“Our coal is sold based on index-linked pricing arrangements. There have been, and will be, significant volatility in pricing, including periods of substantial declines. Coal prices are affected by numerous factors beyond our control, including weather, government regulations, environmental protection practices, as well as macroeconomic and geopolitical drivers.” 
As a result, the Group is exploring potential diversification into new businesses and expanding its revenue streams, to reduce its reliance on and exposure to coal price volatility, as well as achieve its sustainability goals, Melati noted. 
“We’re constantly looking to expand our revenues by way of potential joint ventures, trading and value-accretive acquisitions, including mining concessions to increase output. We will also carefully evaluate asset monetisation opportunities as and when we receive a good offer.”  
For sure, the Group is well-aware of the stigma associated with coal. It remains mindful of the importance of balancing economic development needs with climate change goals, which are coming under increasing scrutiny from investors and stakeholders, Melati acknowledged. 
“We’re currently in the eco-friendly coal space, which has low-ash and low-sulphur properties. This allows us to produce coal that can provide energy with the least environmental impact,” he said. 
“At the same time, we’re also committed to our ESG efforts, with corporate social responsibility concepts firmly embedded within our daily operations to protect our people, the environment and the local communities in which we operate.” 
In particular, the Group takes a proactive stance by increasing disclosure of climate metrics, including emissions data, and setting targets to reduce its overall carbon footprint. In 2020, it managed to reduce both energy and carbon intensity by 26%, he added. 
In the meantime, outside the office, there’s nothing more important than family for this 50-year-old father of two sons and a daughter, aged 19 to 26. His favourite pastimes are watching movies and having meals at home. 
“I always tell my children and staff to seize every opportunity when it arises, and stay focused on the things they do,” he noted. 
“Another core value is hard work, because nothing is for free - you need to put in the effort and be hands-on in order to reap the fruits of your labour.” Geo Energy Resources Ltd 
Geo Energy is a major Indonesian coal producer with an established track record in operating coal mines, coal production and selling coal throughout the region. The Group commenced its business in 2008 as a coal mining services provider and listed on SGX Mainboard in 2012. Since then, Geo Energy has transitioned from being primarily a coal mining services provider to a coal producer that subcontracts its coal mining operations. The Group’s investment strategy is focused on the acquisition of new mining concessions to increase production quantity, and at the same time diversify its sources of coal. The Group owns four mining concessions through its wholly owned subsidiaries PT Bumi Enggang Khatulistiwa, PT Sungai Danau Jaya, PT Tanah Bumbu Resources and PT Surya Tambang Tolindo in Kalimantan, Indonesia. 
The company website is: <a href="http://www.geocoal.com/">www.geocoal.com</a> 
Click <a href="https://www.sgx.com/securities/equities/RE4">here </a>for the company's StockFacts page. 
For the six months ended 30 June 2021 financial results, click <a href="https://links.sgx.com/1.0.0/corporate-announcements/HCB1ERKL9P5ASQEW/678197_Geo_1H2021%20Media%20Release.pdf">here</a>. 
 

About kopi-C: the Company brew

Text: Jennifer Tan-Stanisic Photo: Company file kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations. 
For previous editions of kopi-C: the Company brew, please click <a href="https://www.sgx.com/research-education/market-dialogues">here</a>.   
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to <a href="https://www.sgx.com/jennifer.t@sgx.com">jennifer.t@sgx.com</a>.
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    Geo-Chairman


More than a decade ago, Indonesian entrepreneur Charles Antonny Melati pivoted from property and manufacturing into coal, after noticing a gap in the country’s power generation market.  
“My interest in Indonesia’s coal industry was piqued initially by the frequent power outages and undersupply of electricity in the country,” said the Founder and Executive Chairman of SGX-listed coal producer Geo Energy Resources Ltd.   
At the time, coal was one of the cheapest sources of energy available. The Indonesian government had also announced the first phase of its Fast Track Program in 2006, which aimed to add 10,000 megawatts (MW) of coal-fired energy by 2010.   
“Being a businessman, I started looking for a coal mine to capitalise on this opportunity,” recalled Melati. “In 2008, I entered a joint venture with a company that owned a coal mine. Two years later, my team and I identified viable cost-competitive coal assets and Geo Energy was founded.”  
The growth of Geo Energy in the subsequent years was marked by several significant milestones. They included the Group’s listing on SGX Mainboard in 2012, securing its first mining concession in 2015, transitioning from a coal mining services provider to coal producer the following year, and obtaining its second mining concession in 2018.  
“It has definitely not been easy to build this company from scratch, but the journey has been full of memorable highlights. The learnings over the years have also made it totally worthwhile,” Melati pointed out.   
Lessons along the way included managing stakeholder expectations, educating the market on the viability and future of coal, and now, with the rise of Environment, Social and Governance (ESG) concerns, assuring investors that Geo Energy is able to transition to a sustainable and environmentally responsible business despite being in the fossil fuel industry.  
“I hope to learn and improve continuously as Geo Energy progresses on this journey, and at the same time, give back to society, based on my personal lessons and experiences,” he added.  
Today, Geo Energy is a major Indonesian coal producer with an established track record in operating coal mines, coal production and selling coal throughout the region. It aims to become one of Indonesia’s top 10 coal producers.  
The Group owns four mining concessions in South and East Kalimantan. It actively operates two mines - PT Sungai Danau Jaya (SDJ) and PT Tanah Bumbu Resources (TBR). It has re-started mining operations at PT Bumi Enggang Khatulistiwa (BEK), and plans to commence further exploration at PT Surya Tambang Tolindo (STT).   
While Geo Energy’s coal sales remain focused on Indonesia and China, it has scaled up its presence in other markets such as South Korea, Vietnam and Pakistan. Total coal sales in 2020 reached 10.7 million tonnes, up 45% from the previous year.  
The Group was awarded one of Singapore’s Fastest Growing Companies in 2019 and 2021 by The Straits Times and Statista, based on its strong revenue growth.  Stringent Cost Controls  
Looking ahead, Geo Energy remains focused on monitoring and controlling its costs to maximise cash profits from coal sales, Melati said.   
“Indonesian coal prices came under pressure at the start of 2020 due to COVID-19. We knew we had to make our business model more resilient to ensure we remain sustainable and profitable, so we leveraged on long-standing working relationships with our service providers to lower production costs during the pandemic,” he added.  
“We negotiated to keep our costs in tandem with coal prices. When coal prices recover, these costs will adjust upwards, as we share some of the upside with our service providers, and vice versa. This was how we reduced our production costs and delivered superior financial results in the first quarter of 2021.”  
For the three months ended 31 March 2021, Geo Energy’s operating profit surged to US$39 million - the highest in a quarter - from US$7 million in 1Q 2020, while production cash costs fell by 14% to US$23.14 per tonne.  
For now, industry prospects remain bright. The average ICI (Indonesia Coal Index) 4 price has been gaining since late last year - from US$31.07 per tonne in 4Q 2020 to US$41.84 per tonne in 1Q 2021, and US$63.98 on 2 July 2021.  
Demand for the fossil fuel is set to gain 4.5% this year, driven by soaring electricity demand, according to the International Energy Agency.  
Data analytics firm GlobalData has also forecast worldwide coal output to expand at a compound annual growth rate (CAGR) of 2.3% between 2021 and 2025, to reach 8.8 billion tonnes in 2025. China and India are at the forefront of this accelerating demand, and account for two-thirds of global coal consumption.   
“This increasing demand, along with higher prices, lends a positive outlook to our business, as Indonesia is expected to lead the way, being one of the largest net exporters of coal, and on the back of the trade dispute between China and Australia,” Melati noted.  
Expecting solid demand, Indonesia’s Ministry of Energy and Mineral Resources (MEMR) has raised the national coal production target for 2021 by 75 million tonnes to 625 million tonnes.  
“This gives us the opportunity to apply for an increase in production quotas for our SDJ and TBR mines,” he added. “If approved, we would have a higher production target in 2021 during this period of rising coal prices.”  Managing Price Volatility  
Nonetheless, coal price risk remains a challenge that must be managed, Melati admitted.  
“Our coal is sold based on index-linked pricing arrangements. There have been, and will be, significant volatility in pricing, including periods of substantial declines. Coal prices are affected by numerous factors beyond our control, including weather, government regulations, environmental protection practices, as well as macroeconomic and geopolitical drivers.”  
As a result, the Group is exploring potential diversification into new businesses and expanding its revenue streams, to reduce its reliance on and exposure to coal price volatility, as well as achieve its sustainability goals, Melati noted.  
“We’re constantly looking to expand our revenues by way of potential joint ventures, trading and value-accretive acquisitions, including mining concessions to increase output. We will also carefully evaluate asset monetisation opportunities as and when we receive a good offer.”   
For sure, the Group is well-aware of the stigma associated with coal. It remains mindful of the importance of balancing economic development needs with climate change goals, which are coming under increasing scrutiny from investors and stakeholders, Melati acknowledged.  
“We’re currently in the eco-friendly coal space, which has low-ash and low-sulphur properties. This allows us to produce coal that can provide energy with the least environmental impact,” he said.  
“At the same time, we’re also committed to our ESG efforts, with corporate social responsibility concepts firmly embedded within our daily operations to protect our people, the environment and the local communities in which we operate.”  
In particular, the Group takes a proactive stance by increasing disclosure of climate metrics, including emissions data, and setting targets to reduce its overall carbon footprint. In 2020, it managed to reduce both energy and carbon intensity by 26%, he added.  
In the meantime, outside the office, there’s nothing more important than family for this 50-year-old father of two sons and a daughter, aged 19 to 26. His favourite pastimes are watching movies and having meals at home.  
“I always tell my children and staff to seize every opportunity when it arises, and stay focused on the things they do,” he noted.  
“Another core value is hard work, because nothing is for free - you need to put in the effort and be hands-on in order to reap the fruits of your labour.”  Geo Energy Resources Ltd  
Geo Energy is a major Indonesian coal producer with an established track record in operating coal mines, coal production and selling coal throughout the region. The Group commenced its business in 2008 as a coal mining services provider and listed on SGX Mainboard in 2012. Since then, Geo Energy has transitioned from being primarily a coal mining services provider to a coal producer that subcontracts its coal mining operations. The Group’s investment strategy is focused on the acquisition of new mining concessions to increase production quantity, and at the same time diversify its sources of coal. The Group owns four mining concessions through its wholly owned subsidiaries PT Bumi Enggang Khatulistiwa, PT Sungai Danau Jaya, PT Tanah Bumbu Resources and PT Surya Tambang Tolindo in Kalimantan, Indonesia.  
The company website is: www.geocoal.com  
Click here for the company's StockFacts page.  
For the six months ended 30 June 2021 financial results, click here.  
 

About kopi-C: the Company brew

Text: Jennifer Tan-Stanisic Photo: Company file  kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.  
For previous editions of kopi-C: the Company brew, please click here.    
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to jennifer.t@sgx.com.



Research from SooChow CSSD Capital Markets (Asia), SCCM Asia Research

SCCM Asia Research

Research from SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

<h2>Singapore</h2><h3>The Ascott Limited to acquire two properties in France and Vietnam for S$210m through its private fund</h3><ul><li>The Ascott Limited (Ascott) has entered into two agreements to acquire two properties in Paris, France and Hanoi, Vietnam for about S$210m. The acquisition of the two properties through the Ascott Serviced Residence Global Fund (ASRGF), Ascott’s private equity fund with Qatar Investment Authority, will boost Ascott’s total fund assets under management (FUM) to about S$8bn. Both properties will be acquired on a turnkey basis and are expected to open in 2024</li><li>The acquisition in Paris is a freehold asset which will be refurbished to introduce Ascott’s first Co-living property in Europe under the lyf brand. Named livelyfhere Gambetta Paris, the 139-unit Co-living property is located in a vibrant district in the 20th arrondissement, near galleries, cinemas, trendy cafés and restaurants, street art and music venues. With this addition, Ascott has a total of 16 lyf properties with more than 3,100 units across 13 cities and nine countries in Asia Pacific and Europe. The acquisition of livelyfhere Gambetta Paris, Ascott’s first lyf property in Europe, follows the recent opening of Ascott’s first lyf property in Japan, lyf Tenjin Fukuoka. Five more lyf properties in Singapore and China are set to open in 2021. With this addition, Ascott will have over 3,500 units in 34 properties across 13 cities in France</li><li>The acquisition in Hanoi is the 364-unit Somerset Metropolitan West Hanoi. It is located in Hanoi’s new CBD, close to several government agencies as well as local and international corporations. Somerset Metropolitan West Hanoi is a 10-minute drive to the Vietnam National Convention Centre, the largest convention centre in Vietnam and the Noi Bai International Airport is a 30-minute drive away. Somerset Metropolitan West Hanoi will increase Ascott’s portfolio to over 7,600 units across 31 properties in 10 cities for Vietnam</li><li>With the acquisition of livelyfhere Gambetta Paris and Somerset Metropolitan West Hanoi, there will be eight properties with close to 1,700 units held under the ASRGF. The fund has five operational properties, Ascott Sudirman Jakarta, Citadines Islington London, La Clef ChampsÉlysées Paris, lyf Funan Singapore, and Quest NewQuay Docklands Melbourne. Citadines Walker North Sydney is slated to open in 2022. </li></ul>

SingaporeThe Ascott Limited to acquire two properties in France and Vietnam for S$210m through its private fundThe Ascott Limited (Ascott) has entered into two agreements to acquire two properties in Paris, France and Hanoi, Vietnam for about S$210m. The acquisition of the two properties through the Ascott Serviced Residence Global Fund (ASRGF), Ascott’s private equity fund with Qatar Investment Authority, will boost Ascott’s total fund assets under management (FUM) to about S$8bn. Both properties will be acquired on a turnkey basis and are expected to open in 2024The acquisition in Paris is a freehold asset which will be refurbished to introduce Ascott’s first Co-living property in Europe under the lyf brand. Named livelyfhere Gambetta Paris, the 139-unit Co-living property is located in a vibrant district in the 20th arrondissement, near galleries, cinemas, trendy cafés and restaurants, street art and music venues. With this addition, Ascott has a total of 16 lyf properties with more than 3,100 units across 13 cities and nine countries in Asia Pacific and Europe. The acquisition of livelyfhere Gambetta Paris, Ascott’s first lyf property in Europe, follows the recent opening of Ascott’s first lyf property in Japan, lyf Tenjin Fukuoka. Five more lyf properties in Singapore and China are set to open in 2021. With this addition, Ascott will have over 3,500 units in 34 properties across 13 cities in FranceThe acquisition in Hanoi is the 364-unit Somerset Metropolitan West Hanoi. It is located in Hanoi’s new CBD, close to several government agencies as well as local and international corporations. Somerset Metropolitan West Hanoi is a 10-minute drive to the Vietnam National Convention Centre, the largest convention centre in Vietnam and the Noi Bai International Airport is a 30-minute drive away. Somerset Metropolitan West Hanoi will increase Ascott’s portfolio to over 7,600 units across 31 properties in 10 cities for VietnamWith the acquisition of livelyfhere Gambetta Paris and Somerset Metropolitan West Hanoi, there will be eight properties with close to 1,700 units held under the ASRGF. The fund has five operational properties, Ascott Sudirman Jakarta, Citadines Islington London, La Clef ChampsÉlysées Paris, lyf Funan Singapore, and Quest NewQuay Docklands Melbourne. Citadines Walker North Sydney is slated to open in 2022. 

ASEAN Builder's Scoop (21Jun21) - Ascott Acquires Paris and Hanoi Props

Indonesia

PT Surya Semesta Internusa Tbk and its subsidiaries develop and manage industrial and residential real estates, provide construction services, and manufacture building materials. The Company also operates hotels and provides information technology-related businesses design to support its main businesses.

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