Timah closed its 2009 results which above our expectation and consensus. Positive signals have been seen both internally and externally. Internally, operating cost efficiency consistently improved from 15% of sales in 2000 cut down to only 6% of sales by end 2009. Externally, growing optimism of world economy helps explain the price surges which underpinned by recovery in LME inventory level and some robust leading anc coincident indicators in regions. We expect demand will outstrip supply in coming years. In an astounding market recovery, metals prices often doing well over the past year. We reiterate our BUY recommendation with higher TP at Rp 3,000 offering 30.4% potential upside.
± Above expectation
Timah posted FY09 revenue of Rp 7.7 trillion (-14.8% yoy). Operating profit posted at Rp 688 bn (-66.7% yoy) And net income reported at Rp 313 bn (-76.6% yoy). Lower earnings were mainly prompted by 26.5% lower ASP and forex loss of Rp 120 bn due to strengthened rupiah. While 6% increase of sales volume indicated that demand remained robust amid global recession.
± Stronger earnings expected in 2010 and 2011
With better positive outlook on tin industry and tin price which underpinned by company’s cost efficiency improvement, we expect stronger FY10F and FY11F earnings results of Rp 921 bn (+ 193% yoy) and Rp 1,172 bn (+27% yoy) respectively. There are mainly coming from better ASP where expected ASP of US$ 17,000/ton or 13% qoq increase is expected in 1Q10.
± Higher TP – Reiterate BUY
Based on our new key assumptions and rolling over our base year valuatin towards 2011 with WACC of 14.3%, we came up higher TP at Rp 3,000 per share implying 13x P/E 2011F and 6.8x EV/EBITDA 2011F. Currently TINS is traded at 12.6x – 9.9x P/E 2010F -11F suggesting the cheapest metal player among peers. Our TP offers 30.4% potential upside, therefore we reiterate our BUY recommendation.
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