Bumi announced that its subsidiary Kaltim Prima Coal has managed to secure
US$104/t pricing (up 44% YoY) for JPY10 with a large Japanese customer. This
represents a US$6/t premium to the Xstrata settlement of US$98/t. While the
volume wasn’t disclosed, we expect 25% of the company’s volume (roughly 16m
tons), expected to be exported to Japan, will be priced at approximately the
US$104/t price.
Bumi reiterated it is on track to meet its FY10 average selling price (ASP)
guidance of a minimum of US$67/t. Thus far, Bumi has locked in c.30m tons of
the 64m tons it guided for 2010E at US$62-63/t. Assuming 25% of 2010E volume
to be priced at US$104/t, then to meet its ASP guidance of US67/t, the remaining
18m tons left to be priced must be priced at least at US$42/t. We think the latter
has substantial upside risks given the firming coal prices of late; hence, we see
upside risks to Bumi’s ASP guidance.
We believe the company’s guidance on volume is conservative given the
annualized 72m tons production in 4Q09. Production in 1Q10 was affected by
heavy rainfall in January but should come in at annualized rate of 64m tons.
Hence, we continue to maintain our 2010E sales volume forecast of 68m tons.
As the Newcastle benchmark prices came in at US$98/t (lower than our
expectation of US$105/t), we see downside risks to our estimate for Bumi’s 2010E
ASP of US$75/t. However, as the Newcastle benchmark prices were above
consensus estimate of US$95/t, there could be upside risk to the Street’s ASP
assumption for Bumi.
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