Indopremier ITMG : Waiting For 3Q09 RESULTS

ITMG – BUY ( TP – RP26.600)
Having been risen by 101% YTD, ITMG share price has been moving flat in the last two (2) months, underperforming the JCI both in terms of absolute and relative term. We relate the stagnant of ITMG share prices to the less buoyant 2Q09 results compared to the previous 1Q09. At current point (Graph 1), we view the share price is at a cross road, deciding to move up higher or lower, waiting for the outcome of 3Q09 performances which will be announced on November 10 2009. We like ITMG for its strong balance sheet, high dividend, and its decent financial performances since its IPO in late 2007. In addition, ITMG expansion plan is intact, while acquisition is also in the scheme. Post 1H09 results, we fine-tuned our estimates, and our latest DCF calculation with WACC of 15.1% and LTG 5%, we get slightly higher target price of Rp26,600 still providing investors potential upside of 12%. We maintain our BUY
recommendation.

Lower 2Q09 Results
Compared to 1Q09, ITMG reported lower 2Q09 results with sales at US$329mn (5%, QoQ), operating profit at US$100(-13%, QoQ), and net profit at US$57mn (-44%, QoQ). On the operation level, 2Q09 decline was mainly due to the lower ASP in 2Q09 of US$73.5.ton vs. US$85/ton in 1Q09 (-14$, QoQ). Sales volume was steady at 4.43mn ton (8%, QoQ), and so is production at 4.86mn ton (11%, QoQ). Meanwhile, costs was slightly softening in the 2Q09 mainly due to lower fuel costs. However, below the operation level, ITMG incurred a loss on its hedging transaction at the amount of US$12.9mn, bringing a 44% total decrease in net profit to US$57mn.

Earnings Forecasts
We opt to wait until the announcement of 3Q09 results before revising our current unchanged production volume of 19mn ton, estimated to earn an ASP of US$72/ton. Meanwhile, we see that 2H09 can maintain ASP at the US$70’s/ton level, given the current steady situation of world coal price. With lower total production cost of US$48.62/ton (-12%, YoY), our estimates produces net profit of US$295mn this year, reflecting a decent growth of 26% vs. last year’s earnings.