CLSA PTBA good 1Q09 results, raise the TP to Rp9,600

Our resource analyst Olie looked at Bukit Asam (PTBA IJ) 1Q09 results. PTBA posted net profit of Rp921bn in 1Q09, up by 321% YoY and 138% QoQ ahead of our estimates due to better than expected pricing and costs. Maintain OPF and raise the TP to Rp9,600 (from Rp7,400).

It is interesting that despite the 1Q09 result represents 35% of our and consensus full year forecast, we are only revising up our forecasts by 12% in FY09 and 5% in FY10. We believe that earnings in the coming quarters should be lower than in 1Q09. There was carry over effect in 1Q09, as about 20% of the 5.8mn tonnes of export this year was contracted at higher prices (US$85-90/t). We assume the remaining balance will be sold at much lower prices going forward. We expect PTBA to sell about 14.1mn tonnes of coal in total this year (domestic client is mainly state owned power company PLN, price is @ US$77/t).

In term of valuation, PTBA is trading at 6.8x 09 CL PE, compared to our top pick in the coal sector ITMG 5.9x 09 PE. However, it is worth noting that PTBA is the 2nd most liquid stock in the coal sector after BUMI.

Key points from the report:
1Q09 results ahead of our expectations: net profit of Rp921bn in 1Q09 (=35% of our and consensus earnings), +321% YoY and 138% QoQ.
Good operating numbers, balance sheet remains solid. Sales volume during 1Q09 was up by 4% YoY only, but coal delivery via railway was up by 15% YoY to 2.6mn tonnes.
Limited progress on key long term projects. Still struggling to formalize its JV. Tax is the main issue.
Revising up earnings by 12% in FY09 and the new TP is Rp9,600.

There is news this morning that PTBA is eying 17% stake in Adaro Energy (ADRO IJ). This is the ADRO stake currently controlled by the consortium of Goldman Sachs, Farallon, Citi and Robert Kuok. At Rp1,200/share (price mentioned by the media), ADRO is priced at about 8x 09 CL PE. Another potential deal that PTBA can potentially be involved in: 17% stake in Newmont Nusa Tenggara. All boiling down to prices, both will be minority stakes.