Indopremier Tin Industry Update

China: the Survivor - Tin has more concrete Prospect
Commodities have an attractive volatility, thus it eventually raise our adrenaline in investing. Metal is one of the most valuable commodities and valuable asset for many investors. Amid current bullish market rally, we are quite often asked which metal would offer a good investment. Shortly speaking we find that tin-related product almost seen by us in everyday life especially for electronic products. One of hot example is that cellular smart phone sales that are still booming especially Blackberry nowadays, whereas its market share per late 2008 reached above 50% of total smart phones sales. So from here we confidently prefer tin. Tin is less exposed to the troubled automotive and construction industries than most other metals, although it has been hit by lower demand and de-stocking in the important consumer electronics sector. And Tinplate demand in our view is still stable and growing compare to other metals.


Tin commodity Industry should recover faster and considerably defensive sector
We prefer tin since it is is less exposed to the troubled automotive and construction industries than most other metals, although it has been hit by lower demand and de-stocking in the important consumer electronics sector.

China: The Survivor
Chinese tin prices are traded at a premium to the LME and are currently quoted at around RMB 97,000/tonne ($14,200/tonne) including 3% duty and 17% VAT. Tin becomes an extremely attracting metal and raw materials for China due to arbitrage pricing. However, we remain concern with the risk. Most of the metals in China are used for direct consumption and refining is coming from Indonesia. Indonesia per 2008 was the largest tin exporter to China contributed 51% of total tin import in China.

Yunnan announces second phase of stockpiling
Business with China is the main supportive feature in the physical tin market, although it is not as strong an effect as is being seen in copper and other metals. Chinese domestic tin prices have been very steady and at a premium to the LME for several months, based on the sharp cut-backs in production made there in the first quarter, plus actual or promised stock financing by provincial governments. Therefore, the second round of stock financing measures has been announced to support local producers of non-ferrous metals.

China’s refined tin production fell by 30.4% to 21,074 tons in the first quarter of 2009 according to CNIA provisional official statistics, with Jiangxi province accounting for 9% of the national total.


Japan Tin Import Still Bleak, but electronics export indicate positive signal
Japan’s imports of refined tin in March were only 795 tons, 62% down on the same month in 2008. First quarter cumulative imports amount to 3,917 tons, 52% lower than in Q1 2008. The very low March import figure may also be due to the fact that traders found it much more profitable to ship tin to China at that time, as the Chinese domestic market price was at a large premium to the LME.

Japan electronic Industrial data from CEIC has shown limited decline and start to recover. China known as the survivor again, as seen in exhibit 9 where Japan’s electronic export to China has increased 18% MoM reached JPY 33 Bn per March 2008. While export to US and EU increased by 40% up to JPY 9 Bn and 8% up to JPY 6.9 Bn respectively

2009 Recap: What Changes?
In line with our expectation that decreased tin price would be limited since it still support with relative strong market segment which consumer oriented such as electronics. Average Ytd for tin price in LME has reached US$ 11,400/Mt. We still maintain our average tin price assumption this year at US$ 12,000/Mt and US$ 14,000/Mt in 2010, since we would expect there is correction in commodity price in second semester followed by consolidation at US$ 12,000 – 13,000/Mt level for this year considering historical trend whereas crude oil price at rang US$ 55 – 60/brl, tin price stood at US$ 11,500 – 12,000/Mt and when crude oil price at US$ 60 – 70/brl, tin price stood at US$ 13,500 – 14,000/Mt.

Recommendation: Market Price already Price In, Maintain HOLD
Based on our new assumptions our DCF model with WACC of 16.1% arrive new TP at Rp 1,850 per share implying PER09F at 21.3x and PER10F at 11.8x. TINS historically traded at range 9.5x – 10x current EPS (see exhibit 19) and traded at 22.9 PER09F. We find that market price has price in our new TP and also already overpriced. However, we still view that would be market correction in short and mid term. Thus we maintain our HOLD recommendation.