Geo Energy

Geo Energy +7% to $0.535 but OSK-DMG cautions that downside risks to growth persist despite 2012-14 EPS CAGR of 24% on rising coal production. House notes the stock rallied more than 50% after the announcement Jim Rogers was joining the board. While it believes Rogers' strong track record in commodity investing improves GER board's credibility, fact is he has not invested in the company nor has there been a change in the fundamentals. Highlighted downside risks include the single coal-mine asset with low reserves/resources, its low calorific value coal, inducing export-prohibition risks and exposure to price volatility due to a lack of contracted sales. The 9M12 results also seem to suggest the potential risk to mining-segment from higher-than-estimated strip ratios. It cuts its 2012 earnings forecast by 15% after a weaker-than-expected 9M12, but raises its 2013-14 forecasts by 4-5% on a newly announced coal-trading contract. It expects 2013-14 EPS growth of 26-65% on rising coal production and improving realized prices but keeps a Sell call with $0.34 target.