Macquarie Banpu, IndoTambang Raya (ITMG)

Banpu & IndoTambang Raya (ITMG)
Banpu/ITMG held analyst meeting on 2009 outlook. The company guidance for 2009 appears to be more optimistic than what we had built into our forecast. Albert/Adam maintain Outperform on Banpu/ITMG with target price of Bt347/Rp22,000. Banpu trades on 2009E PER of 5.3x and EV/EBITDA of 4.4x. ITMG on 2009E PER of 3.6x and EV/EBITDA of 1.5x.

(1) 2009 production increasing to 20.5mt driven by Indominco east block: 2009 production was 17.7mt in 2008. 2009 production growth will be mainly driven by the commencement of production at the Indominco East block from 2H09 with an initial 2mt production, after all the necessary licences are obtained in February 2008.

(2) Locked in 57% of 2009 production at US$ 80/t: As of February 2009, the company contracted 85% of its production and priced in 57%, or 11.7mt, of its 2009 production at US$80/t, with the remainders being unpriced or index linked (14% index linked and 29% unpriced). We forecast that the remainders of the un-priced contract will be priced at a benchmark price of US$75/t, leading to an average selling price of US$69.8/t.

(3) Reserves and resources upgrade: Banpu has announced it upgraded its reserves and resources (100% equity basis) from 339mt and 1.7bt, to 600mt and 2.1bt, respectively. This is mainly driven by the long-term coal price assumption upgrades (from US$45 up to mid-US$70 benchmark price) as well as the new acquisition of AACI (Daning and Gaohe mines ) in China . ITMG reserves and resources were up from 237mt and 1.5bt to 312mt and 1.7bt, respectively (mainly from Indominco and Trubaindo).