DBS Indonesia Result Snapshot Adaro Energy

At a Glance
• 1Q09 net earning within expectation
• Strong revenue growth driven by higher ASP
• Balance sheet position improved
• Maintain TP but downgrade to HOLD

Comment on Results
Adaro Energy (ADRO)’s 1Q09 net profit surged 470% q-o-q to Rp1,145bn, in line with expectations. Group revenue grew 15% qo-q while production cost fell 5%, which resulted in gross profit growing 58% q-o-q to Rp2,829bn. Revenue growth was driven by
41% higher average selling price (ASP) to US$61/ton. Coal production increased 8% q-o-q to 9.0 mil tons while coal sales volume edged down 2% q-o-q to 8.6 mil tons.

ADRO’s net gearing as at March 2009 improved to 0.46x from 0.54x in December 2008 following an improvement in cash and equity balance. Total cash as at March 2009 was Rp3,587bn, while total cash flow from operations was Rp1,352bn..

Recommendation
ADRO’s healthy growth in 1Q09 further cements our optimism that the company will register robust growth this year, driven by sharp improvement in ASP and sales volume. We are retaining our forecasts for ADRO, but downgrade our recommendation to HOLD because the recent share price appreciation has limited upside
potential to our target price.