DBS TINS 3Q09 earnings inline with expectation

At a Glance
• 3Q09 earnings are inline with our estimate
• Increase in tin price able to offset lower sales volume
• Outlook on tin remains upbeat
• Maintaining our TP and BUY recommendation Comment on Results

Timah (TINS) reported its 3Q09 net profit of Rp128bn, a 350% q-oq increase and inline with our estimate. Total revenue grew modestly by 2% q-o-q amid higher tin selling price (+10% q-o-q) as the sales volume during the quarter declined by 6% q-o-q. Stronger IDR compared to USD during the quarter (+5% q-o-q) also contributed to the lower revenue. Gross profit managed to edge up by 42% q-o-q due to decline in production cost given that cost of tin-ore has already normalized. On y-o-y basis, net profit declined by 89% to Rp171bn, largely due to fall in tin price by 41% y-o-y. On the contrary, production cost increased by 12% y-o-y as tin ore purchase price remains high as the contracted price was signed in 4Q08 when tin price was still high.

Both revenue and production cost were higher than our estimates due to higher than expected selling price along with higher production costs. As such, we raised our FY09 revenue and production cost by 10% and 12% each respectively while the bottom line figures remain unchanged.

Recommendation
Going forward, we remain positive on TINS as we believe the current level of tin price will sustain entering FY10, hence, company profits next year will experience robust growth. We reiterate our BUY call on TINS and maintain our target price at Rp3,050 based on target FY10 PE of 11.4x.