(TINS IJ / TINS.JK, OUTPERFORM - Upgraded, Rp1,480 - Tgt. Rp1,680, Basic Resources)
We upgrade Timah to Outperform from Underperform as it had turned a profit in 1Q09, faster than expected. We now believe its earnings bottomed in 1Q09 and upcoming quarters could show recovering margins. The tin-price outlook in the near term is rosier on a China recovery and possible limited supply from Indonesia. We raise our EPS estimates by 18-70% for FY09-11 largely on higher ASP assumptions, and our DCF-based target price has been raised to Rp1,680 (from Rp800) after using a single, lower WACC of 16% (from 16-20% previously). Timah's share price has been lagging its Indonesian and Chinese mining peers. A 5% increase in tin price would raise our EPS estimate by 8%.
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