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A Great Eastern revival

RESULTS: India-focused Great Eastern Energy delivered a much better second-half performance, complete with a step-up in revenues, profits and reserves.
July 28, 2014

The fortunes of Great Eastern Energ y (GEEC) are intertwined with the health of the Indian economy. The faltering rupee loaded additional operating costs on the coal-bed methane producer during the first half, which ended on 30 Sep. During the second half, however, the Indian economy showed signs of revival, and so did Great Eastern. Revenues for the whole 12 months were up nearly a third on a constant currency (CC) basis to Rs 2,084m (£20.43m), while CC cash profits surged 42 per cent to Rs 1,447m.

IC TIP: Hold at 125p

Gas sales from Great Eastern’s Raniganj (South) block were up by a quarter year-on-year, and have also strengthened markedly since the March year-end. Total gas supply contracts increased by 5 per cent over the year, but revenues were also bolstered by better-then-expected realised prices.

A total of 156 wells have now been drilled at Raniganj (South), although that number hasn’t increased since late last year. Great Eastern will step up its drilling programme as soon as one of its key customers - the Steel Authority of India (SAIL) - is ready to take on increased volumes.

Great Eastern’s upcoming IPO in India should provide additional funding for building wells once supplies to SAIL ramp up. There’s clearly no capacity shortfall. In March, an independent reserves report increased the company’s proven and probable reserves by a third.

Arden Partners anticipates adjusted EPS of $0.09 for the current financial year.

GREAT EASTERN ENERGY (GEEC)
ORD PRICE:125pMARKET VALUE:£149m
TOUCH:120-130p12-MONTH HIGH:230pLOW: 124p
DIVIDEND YIELD:NILPE RATIO:13
NET ASSET VALUE:67¢NET DEBT:138%*

Year to 31 MarTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
20103.0-8.5-15.0nil
201113.5-0.3-0.5nil
201223.7-2.8-5.0nil
201329.27.512.0nil
201434.413.017.0nil
% change+18+74+42-

£1 = $1.70 *Includes restricted deposits of $0.63m