Credit Suisse ANTM To build coal-fired power plant and more gold trading activities

● Antam has decided to forge joint venture partnerships with PT Nava Bharat Indonesia (not listed) and PT Indika Energy, Tbk (INDY, Rp1,640.00, not rated) to build a 2x75 MW coal-fired power plant. This venture is part of a cost-efficiency programme and Antam would own a 20% stake in it.
● We have revised our earnings estimates for Antam due to: 1) higher capital expenditure and costs, 2) increase in gold-trading activities, which generate low profitability and 3) lower nickel ore exports due to the new mining law to be implemented in 2010. These issues have caused a 30% cut in our 2009E and 2010E EPS to Rp32 and Rp40, respectively.
● Although nickel price has shown some increase recently, we expect a disappointing 1Q09 result, due to be announced in late April 2009. The result would generate negative sentiments on the stock and as the near-term catalysts tend to be also negative, we retain our NEUTRAL rating and prefer investors take profit. We maintain our target price at Rp950, based on a P/B of 1.1x 2010E.