As described by Chew in his Sept 26 note, construction of the 92 km hauling road and jetty in South Sumatra is 30% completed and on schedule.
He expects at least 40% completion and 100% road clearance by the end of the year end and the road is set for completion in the middle of next year.
When the road is completed, Geo Energy can then ramp up output of its TRA coal mine, which Chew expects to reach 12 million tonnes in FY2027 from 2 million now.
The road, when completed, will be leased to other coal miners for their similar transportation needs. Chew figures another 25 million tonnes of coal can be ferried at a rate of US$6 to 8 per tonne.
Chew notes coal prices have stabilised at the US$42 per metric tonne after 20 months of decline, after production in China, both a major producer and consumer, eased. "China is implementing tighter controls against overproduction," says Chew.
He is keeping his earnings projections for now, but with the completion of the infrastructure within schedule, Chew has lowered the discount on his valuation of the coal assets and toll revenue from the integrated infrastructure from 70% to 60%.
This leads to his discounted cash flow target price of 59 cents, from 47 cents previously.
Geo Energy shares closed at 45 cents on Sept 25, unchanged for the day but up 55.17% year to date.
