Ricardo Silaen published a BUY note on Bukit Asam. He expects net profit to peak in 2009, soaring by 62% YoY to Rp2.9t on the back of higher coal production and higher domestic price. Margin expansion is expected as production cost, driven by lower fuel price, is likely to drop. Management aims to produce 13m tons of coal and sell 15.5m tons in 2009 with total revenue between Rp10t and Rp11t. Ricardo’s forecast is more conservative, with assumption of sales volume of 15m tons in 2009 or increase by 17% YoY. In 2010 he assumes growth of 9% with total sales volume of 16.4m tons or 50% more compared to that in 2007. After years of stagnant production, in 2008 Bukit Asam was able to boost its coal production to above 10m tons. It produced 10.8m tons of coal, or 16% higher compared to that in 2007. This is attributable to improvement in transportation system, especially railway from the state owned company PT Kereta Api from mine in Tanjung Enim to Tarahan and Kertapati.
BUY, TP is Rp11,600 (55% potential upside).
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