Geo Energy +37%; But debut may be over-exuberant

Players may be getting a little over-exuberant on debutante Geo Energy, which is up 37% at $0.445 vs its $0.325 IPO price in strong volume with nearly 225 million shares changing hands.

The Indonesian coal-mining play appears to be trading around 31x FY11 EPS, based on the post-offer FY11 EPS of 1.24 US cents, or around 1.51 cents, from its prospectus; larger Indonesian-listed peers generally trade at less than 20x FY11 P/E.

Indonesian coal players’ outlook is “relatively subdued if we look at the coal prices. They appear to still be under pressure because of the abundance of supply. At least we’re seeing some production curtailments among the smaller miners in Indonesia and China,” an analyst says. “Given that the small guys are starting to cut production, it has already eaten into their profitability and they (likely) aren’t making any profits,” the analyst adds, noting the larger players are still above break-even with the Indonesian-listed stocks generally trading sideways.

Geo offered 258.3 million new shares and 30.9 million vendor shares; most of the around $87.5 million estimated net proceeds are earmarked to buy additional mining equipment and to construct jetty and barge-loading facilities.

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