Aneka Tambang - Indonesia Company update - Gold outshining nickel - by Rania Rahmundita (ANTM IJ / ANTM.JK, OUTPERFORM - Upgraded, Rp1,060 - Tgt. Rp1,280, Basic Resources)
Antam's earnings could decline significantly this year, but we should see a return to profits in 1Q09 on cost reductions and shipment resumption. Ferronickel profitability is starting to stabilise, while gold is poised for a more significant role in Antam's earnings. 4Q08 profit was already gold-driven. We have cut our FY09 EPS forecast by 3.5% on pricing adjustments for 1Q09, but raise our FY10 forecast by 12.5% on higher gold price assumptions. Our DCF target price has been jacked up to Rp1,280 from Rp815 on higher long-term gold price assumptions, expectations of longer gold operations and higher cash generation. Current valuation has priced in FY09's earnings contraction, we believe. Upgrade to Outperform from Underperform.
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