Though coal is the most carbon-intensive fossil fuel, it accounts for around a third of global electricity generation, according to the International Energy Agency (IEA). Demand for coal has been rising in Asia, with the three largest coal producers—China, India, and Indonesia—producing record amounts in 2022. Particularly, in Indonesia, increased electrification and new coal-fired power plants ensure the demand for coal.
One company that benefits from this demand is Singapore Exchange (SGX)-listed Resources Global Development (SGX: QSD). Listed on the Catalist in January 2020, Resources Global Development (RGD) engages in procuring thermal coal from coal mines located in South Kalimantan for sale to primarily domestic coal traders operating in various industries like nickel smelting and cement manufacturing.
RSD also operates coal shipping services, such as chartering services and transshipment services, between coal mines located in South Kalimantan and the Java and Sulawesi islands in Indonesia. As of February 2024, RSD owns a fleet of 22 vessels, comprising 21 tugboats and one bulk carrier, with a further 9 more vessels to progressively roll out by the end of 2024.
Here are 5 things to know about RSD if you are interested in the energy sector.
Global shipping has seen a volatile year, especially due to the recent restrictions and banning of coal exports in Indonesia – how do you think this will affect RGD’s business?
We provide chartering and transshipment services to our customers. Our 22 vessels (21 sets of Tug and Barge, and 1 Bulk Carrier), ply the Indonesian waters. Apart from coal, we also ship other commodities such as sand, bauxite, nickel and granite.
As our focus is currently within Indonesia, we are directly correlated to the demand and supply of the local shipping market, instead of the global shipping market.
One factor driving our profitability is that our Trading and Shipping businesses are complementary in nature. This allows us to derive cost efficiencies and extract more value from the supply chain.
Source: SGX–The process of RGD’s chartering and transshipment services to Indonesia.
Read Also: 5 Things To Know About Marco Polo Marine (SGX Code: 5LY), The Company That Transports Aggregate Materials Supporting Singapore’s Construction Sector
How would acquisition of Batubara Development create synergies with RGD’s existing operations? What costs or revenue synergies are expected?
By diversifying into coal mining, we are adding another synergistic income pillar and creating a vertically integrated business model.
The acquisition will also further strengthen our existing Trading and Shipping businesses. This is because our growing number of vessels can be deployed to transport coal from our coal mines to our customers. This inhouse cargo capability will not only create revenue synergies but also set us apart from our peers. The vertical integration will also allow us to derive economies of scale for our operations.
What are some ongoing market opportunities and trends and how are these being leveraged to strengthen your businesses?
Indonesia aims to establish itself as a leading manufacturing centre for electric vehicles (EV) and batteries, with nickel playing a pivotal role in this strategic initiative. We are a proxy to the country’s growing EV production, which is fueling coal demand. Our customers currently supply coal to nickel smelters.
Additionally, Indonesia is a resource-rich country. With its ambition to be a hub for EV manufacturing, the movement of different resources such as coal, bauxite, cobalt and copper (which are important components of EV batteries) within the Indonesian archipelago is expected to increase, benefitting our Shipping business.
Read Also: 5 Things To Know About RH Petrogas (SGX Code: T13), The Company That Operates Two Oil Production Sharing Contracts In Indonesia
Interest rates are expected to stay elevated for the next two years. What impact does this have on the Group’s businesses and how is it managing this risk?
Our operations and growth are mainly funded using cash generated internally from operations, while a small portion from short-term loans. Movement of interest rates are therefore very well managed.
We have also explored other fund-raising options, for example, the upcoming Placement.
Read Also: 5 Things To Know About Uni-Asia Group (SGX Code: CHJ), The Company That Engages In Dry Bulk Chartering And Does Property Construction In Japan And Hong Kong
What are some of the Group’s potential catalysts that investors can be excited about in the near term of 1 to 2 years?
We look forward to commence production at our coal mines, estimated to be towards the later part of 2024, subject to weather conditions.
By then, our two engines of growth will drive us forward. For Shipping, 9 more sets of tugboat and barge will be rolled out in 2024, which will in turn raise our carrying capacity by a further 30% to around 300,000 DWT. For coal handling (which involves both coal mining and trading), the estimated proven and probable reserves of 162 million tonnes at our mines will also augment our growth.
Editor’s Note: Some answers for this article were extracted from the SGX 10 in 10 series published on 7 February 2024 and have been republished with permission. You can read more on Resources Global Development (SGX: QSD) on the SGX website.
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