BASML PTBA FY09 results below consensus

FY09 results evoke mixed reactions
PTBA released its FY09 results on Sunday. FY09 net profit came in at Rp2,727bn, up 60% YoY, ahead of our forecast by 10%, largely driven by higherthan- expected interest income and income from sales of fixed assets. Indeed, EBIT at Rp3,548bn was up 42%, surpassing our forecast by only 4%. But against consensus, EBIT and net profit came in below by 9% and 6%, respectively; this was down to consensus not factoring in higher opex (up 51% QoQ).

Earnings revised up; PO maintained
Largely on higher interest income, we raised our net profit estimates by 5% for 2010 and 5% for 2011. We kept our NPV-derived PO unchanged at Rp18,800. This has factored in 80% valuation of the coal business generated from the new railway. We understand the EPC contract is still not signed since China Railway wants to re-negotiate its EPC contracts upwards from the current US$1bn.

No surprises in volume and ASP
4Q sales volume rose 30% QoQ to 3.7mn t, with a bigger proportion being sold to the domestic market (47% in 4Q vs. 30% in the first nine months). That’s primarily because of significant QoQ jump in sales from China. Indeed export ASP was down 11% QoQ to US$67/t as the coal sold to China was lower in calorific value (at 5,900kcal GAD). Domestic price for FY09 ended 13% higher than export at US$72/t as the price was settled before coal price corrected.

QoQ jump in cost apparent, but that’s because of high wage
4Q FOB cost surged 25% QoQ to US$51/t. This was due to a Rp230bn increase (US$6/t) in wages as a result of changes in actuarial methodology to calculate pension money. This number will reflect again in 2010 onwards.

Maintain Neutral
The share price has come down 15% from its peak. Still, the stock is trading close to its historical P/E (when coal prices were at their peak in 2008). The next key catalyst for the stock is the signing of EPC contract with the railway. Given the continuing delay and possibility of coal price being capped in near term, we think the share price will not go anywhere in near term.