BAS-ML INDO ITMG initiation PGAS raise PO

ITMG: initiate w/ Buy PO Rp 25,000
Daisy Suryo initiated on Indo Tambangraya (ITMG) with a Buy PO Rp 25,000 driven by its potential big dividend, and healthy volume growth. She expects ITMG to generate FCF of US$333mn (13% yield) in 2010, able to payout dividend of US$174mn (8% yield) based on 60% historical payout. We see upside for an even bigger dividend as capex is limited (no big-ticket items such as infrastructure, and capex for volume growth will be borne by 3rd-party contractors). We project 10% volume growth from 20mt in 2009 to 27mt in 2012 of which ~90% is exported. This will translate into Ebitda and net profit CAGR of 14% over 2009-12 (vs. Indo’s peers of ~4%). Having Banpu, which operates an expanding power bizz in Thailand & China, as the core shareholder also provide demand security. ITMG is now Daisy’s top pick in the sector for its highest divvy yield, one of the best corporate governance among Indo coal companies, and attractive valuation. Trades at 6.8x '10 PE or 36% disc to peers. Current share price implies US$67/t coal px. Our PO implies 8.7x 2010E PE.

PGAS: raised PO to Rp 4,000
Daisy raised PO by 25% to Rp4,000 to reflect 4-11% higher gas volume and 5% lower tax by 2010. She also lowered the execution discount to 10% from 20% as PGAS’ volume delivery has beaten our forecasts for the past 2 mths, and the building of the new gas offtake with PLTU Cilegon and PLTU Tanjung Priok are now completed and connecting pipeline construction is underway. We raise earnings by 8%, 20%, 5%, 9% for 2009-12. We continue to see potential for high dividend yield with PGAS expected to generate FCF of US$908mn or 11% yield in 2010, and able to pay dividend US$390mn or 5% yield. Trades at 10x 2010 PE, a 28% disc to regional utilities. Our Rp 4,000 PO is based on YE10 NPV which is raised by 15%.