· The company announced a net profit of Rp604bn in FY09, down by 54% YoY, and came in line with our estimate. The figure was slightly better than the unaudited number release in Feb10 of Rp559bn, largely due to higher other income, amounting Rp35bn.
· Revenue was down by 9% YoY to Rp8.7tn in FY09, despite 33% to 39% lower ferronickel and nickel ore prices and 4% to 17% decline in ferronickel and nickel ore sales. Therefore, gold trading and refining business was the main driver for revenue in 2009, contributing to around 55% of total revenue. Note gold trading and refining generates very thin margin.
· Production costs were in line with expectation, but operating expenses, totalling Rp610bn, were 10% higher than estimated, largely driven by both G&A and exploration spending.
· M&A angle is much benign now as the company has lost to Bumi Resources in bidding for stakes in Newmont Nusa Tenggara. Strong Rupiah would also be negative for Antam given its 50% Rupiah based costs. Key catalyst for Antam would therefore be delivering its Cibaliung gold project that could potentially double its gold production to 4.5t in 2 years, with some 0.5t targeted by management this year. We at the moment, have conservatively assumed 0.3t production from Cibaliung and ramping that up to 2.0t in 2013.
· On Antam, the counter does not look cheap on relative basis, trading at 50% premium to historical multiple, and 20% premium to its DCF estimate. We set our target price at Rp2,050 for Antam, based on blended valuation approach, suggesting some 10% downside. We retain our Underperform rating.
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