Though 2015 was a challenging year for us as we faced headwinds from the coal sector, as well as prolonged unfavourable weather conditions, we continue to forge ahead with our diversification plans to diversify into other sectors.
The Group has signed a memorandum of understanding to acquire a majority stake of at least 51% shares in PT Kariangau Power (“PT KP”) (“Proposed Acquisition”). PT KP owns and operates 2x 15MW coal-fired steam power plant in the Kariangau industry area of Balikpappan, East Kalimantan, which will allow the Group to tap into Indonesia’s growing demand for electricity. The assets of PT KP are already operational being strategically located next to a coal terminal, which ensures a secured source of coal and reduces the cost of transport. We will make further announcements on the material developments in relation to the Proposed Acquisition.
In January 2016, we signed a memorandum of understanding for a proposed share swap between the Company and a vendor, for 25% of the shares of GiantMiner Pte. Ltd. (“GiantMiner”) with the Group’s 60% interest in Starsmind Capital Pte. Ltd. (“Starsmind”). GiantMiner owns 100% of China-based mining company, Urumqi Jinshi Huilong Mining Co., Ltd (“UJHM”), which holds mining exploration permits in respect of minerals in three (3) concession areas covering a total of 26.99 sq km in Xinjiang, PRC.
On the other hand, Starsmind owns an indirect stake of 23.64% in China-based mining company, Xinjiang Fengli Deyuan Trading Co., Ltd which holds a mining exploration permit for one (1) concession area in Xinjiang, PRC.
Once the proposed share swap is completed, we will no longer have any interest in Starsmind and will have an indirect interest of 25% in UJHM.
We have re-evaluated our strategic plans and believe that it is in the best interests of the Company and its shareholders to dispose of our interests in Starsmind and focus our resources on other investments. The proposed share swap is aligned with the Group’s plans to diversify into the mineral resource business and will enable us to acquire a strategic stake in GiantMiner.
While we are constantly striving towards building a stable income base through our diversification efforts, the core business of the Group was adversely affected by the unfavourable weather conditions throughout the year which resulted in a reduction in coal transportation volume.
Consequently, the Group reported lower revenue of S$8.7 million for the financial year ended 31 December 2015 (”FY2015”) as compared to S$17.0 million in the same period the year before (“FY2014”). Net attributable loss to equity holders of the Company was S$24.4 million in FY2015, as compared to S$5.9 million in FY2014. This was predominantly attributable to the non-cash impairment losses arising from the Group’s shipping business in FY2015, whilst the shipping and coal industries remain uncertain against the unfavourable global economic condition.
Despite the less conducive environment, the Group’s balance sheet remains healthy. The Group’s cash balance grew by S$4.9 million to S$86.1 million and we have zero debt on our balance sheet.
Barging & Shipping
The weather conditions remain unpredictable which has affected the water levels of our transport channels.
Furthermore, coal prices are unlikely to recover in the near term as demand in the major coal consuming countries continues to be low and major Indonesian thermal coal producers have not shown indications of production cuts for 2016. In view of these factors, analysts have been reducing their coal price forecasts . We remain cautious on our earnings outlook for 2016 in this challenging environment.
The Group’s 40-year leasehold development in Ningbo, China, is expected to be completed in 2020. Upon completion, the development will cater to the New Southern Business District, which is primed to be an emerging commercial hub.
Demand for electricity in Indonesia is expected to rise especially in East Indonesia where demand is forecasted to grow at 11.2% per annum . At the same time, PT Perusahaan Listrik Negara (“PLN”), the state-owned enterprise of Indonesia that supplies public electricity, is targeting to increase Indonesia’s electrification ratio from 83.0% in 2014 to 98.0% by 2022. In East Kalimantan in East Indonesia alone, projected production is expected to more than double to 6,702 GWh from 2014 to 2022 . This will support our optimism for the forthcoming business opportunity in the power plant sector.
The mineral mining business has a considerable investment horizon which we are prepared to take a long term view on it.
On behalf of the Board, I would also like to thank our management team and staff for their hard work and commitment throughout the year.
We would also like to extend our appreciation to all our business partners for their continued support and trust in us. Finally, I want to thank our shareholders for standing by us and your unwavering support as we strive towards creating sustainable value for the long term.
Liow Keng Teck Chairman
21 March 2016