CIMB Tambang Batubara Bukit Asam Company update - Welcoming the new railway

(PTBA IJ / PTBA.JK, OUTPERFORM - Maintained, Rp14,450 - Tgt. Rp21,000, Basic Resources)

We maintain Outperform on PTBA. PTBA's new railway project has seen encouraging developments recently. Although the market has conservative expectations for this project, we believe there are now much lower legal and funding risks ahead. Once the market starts to realise the significant scope for value-unlocking, we believe there could be re-rating catalysts. We cut our FY09-11 EPS estimates by 3-7% on adjustments to our assumptions for capacity increases at its existing railway. But factoring in the new railway plus rolling our valuation to end-CY10, our target price rises to Rp21,000 (now based on sum of the parts) from Rp17,000 (DCF with WACC 14%, LTG 0%).