Company Overview

Resources Global Development (RGD) has established a reputation as a reliable provider of trading and shipping services in Indonesia. It procures thermal coal from coal mines located in South Kalimantan for domestic and export sales, as well as provides chartering and transshipment services across the Indonesian territories. The Group’s growth in profitability has been driven by its continued fleet expansion, from 9 vessels at IPO to 22 vessels today. RGD has recently obtained shareholders’ approval to acquire all the issued shares in the capital of Batubara Development Pte. Ltd., which has interest in 4 coal mines in Central Kalimantan, and to diversify its core business to include coal mining. Link to Stock Screener company page.

1. What Are Some Highlights From Resources Global Development’s Recent Financial Performance?

• Resources Global Development (RGD) was listed in January 2020 when the COVID-19 pandemic first started. Despite this, RGD has delivered continued growth in profitability, underscoring our ability to navigate the COVID19 pandemic and industry headwinds.

• Our profit attributable to equity holders of the Company increased at a CAGR of 156% from FY2020 to FY2022, while EPS grew from 3.5 cents to 22.4 cents over the same period, translating to a CAGR of 153%. This growth momentum was driven primarily by our growing Shipping business, which has higher margins.

2. 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 globalshipping 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.

3. Are There Any Plans to Increase the Percentage of Your Shipping Services to Other Resources?

• While the bulk of our Shipping customers use our vessels to transport coal, our fleet expansion has allowed us to diversify beyond coal to cover other commodities – we have started shipping sand, bauxite, nickel and granite.

• Instead of setting hard targets on the proportion and types of commodities to ship, we want to continue with our agile approach – which is to improve shipping efficiency and turnaround time, and to pursue higher value projects. This strategy has worked, evident from the growing contribution from our Shipping segment to our overall gross profit.

4. What are the mid to long term expansion growth strategies and how does the Company fund these plans?

• Through short-term loans and cash generated internally from operations, we will continue with our fleet expansion in Indonesia, where the demand for chartering and transshipment services outstrips supply. 9 more sets of Tugboat and Barge will be progressively rolled out in 2024, lifting our total number of vessels from 22 to 31 by the end of 2024, representing an additional 70,000 deadweight tonnage (DWT).

• Diversifying into coal mining is transformational to our Group. We intend to raise funds through the upcoming Placement of 10 million new ordinary shares, to fund the acquisition of Batubara Development.

5. RGD recently announced the acquisition of Batubara Development. What value will this deal bring to shareholders?

• Through the acquisition of Batubara Development, we would augment the supply of our Trading business.

• The 4 coal mining permits with production operation period until June 2032 are valuable. According to the JORC (Joint Ore Reserve Committee) report, the mines have an estimated proven and probable reserves of 162 million tonnes of coal. We are confident of raising the coal volume managed by the Group in a significant manner (FY2022: Trading volume of 1.3 million tonnes).

• With coal mining added into our business model, we can capture the margins across the supply chain – from source to customers.

6. 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 verticallyintegrated 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.

7. 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.

8. Explain the reasoning behind the acquisition of Batubara and its coal mining amidst ESG concerns?

• We acknowledge that Indonesia and the region will eventually need to balance off with renewables. However, in the short term, amidst the energy transition, Indonesia will still need affordable “baseload power” to generate electricity for the mass population who are mostly in the low-income group. At this moment, coal remains the cheapest, most reliable, and most accessible energy source.

• Indonesia’s projected demand for power generation is expected to be on an uptrend. It is building more coal power plants to fuel the production capacity of metals like aluminium, nickel, copper, and cobalt, which are essential components to manufacture electric vehicle (EV) batteries. The increased coal power generation is to meet the increasing demand for EVs in Indonesia’s growing green economy.

• In short, we are tapping opportunitiesin Indonesia’s green transition to create value for shareholders.

9. What kind of engines do the Company’s Indonesian-flagged vessels run on and are there any plans to transition towards greener fuel?

• Starting February 2023, we have further increased from 30% to 35% biodiesel blended marine fuel to meet the new localstandards.

• The incorporation of biodiesel reduces the greenhouse gas emissions produced as compared to the combustion of pure fossil fuel.

10. Why Should Investors Take a Closer Look at RGD?

• Looking forward, we believe RGD’s future will be driven by our two engines of growth, namely shipping and coal handling (which involves both coal mining and trading).

• We also believe that the acquisition of Batubara Development will strengthen the security of our coal supply, and the upcoming Placement will hopefully also help to improve RGD’s trading liquidity.