DBS PTBA 3Q09 result below estimate

At a Glance
• 3Q09 net profit came in below our estimate, due mainly to lower sales volume
• However, our positive outlook for the company is intact
• Maintain BUY recommendation and Rp18,550 TP Comment on Result

Tambang Batubara Bukit Asam (PTBA) reported 3Q09 net profit of Rp636bn, down 5% q-o-q and slightly lower than our estimate. Total revenue fell 5% q-o-q to Rp2,054bn on the back of a 4% drop in sales volume and lower export price (-17%). Following
lower volume sales, production cost also fell 6% q-o-q, while gross profit fell 5% q-o-q. However, domestic selling price improved by 9% q-o-q.

On y-o-y basis, revenue grew 32% y-o-y to Rp6,555bn, while net earnings grew 69% y-o-y to Rp2,228bn. Domestic selling price surged 57% y-o-y while export price rose a more modest 4% y-o-y. Total sales volume declined by 7% y-o-y. PTBA’s balance sheet remains solid with a net-cash position. Total cash balance as at Sep 2009 was Rp2,629bn, while cash flow from operations was Rp593bn.

Recommendation
We remain upbeat on PTBA’s prospects given its strategic plan to expand production that should improve profitability going forward. Rising domestic demand for coal from newly installed power plants in the next few years will also be positive for PTBA due its large exposure to the domestic market. Having said that, we maintain
our BUY call on the counter, and Rp18,550 target price based on DCF with assumed WACC of 12.6% and implied FY10 PE of 15x.