CIMB Timah Company update - A bargain

(TINS IJ / TINS.JK, OUTPERFORM - Maintained, Rp2,225 - Tgt. Rp3,100, Basic Resources)

We maintain Outperform on Timah as we believe Timah's strong earnings momentum into FY10 has been overlooked by the market. Our DCF-based target price rises to Rp3,100 from Rp2,410 from our EPS upgrade as well as rollover to CY10. At 9x CY10 P/E and projected 115% yoy net profit growth for FY10, we believe Timah is a bargain relative to the other mining stocks. Plus, its 75% discount to its closest Chinese peer is excessive, we believe. We have raised our FY10-11 EPS forecasts by 19.5-28% on higher average tin-price assumptions. With its strong momentum in earnings, upside in tin prices and potential consensus earnings upgrades, we believe Timah's valuations could return to its peak at two standard deviations above its mean i.e. 13x CY10 P/E (currently at 1-year moving average).