On the back of strong industry recovery, we revised our revenue and net profit forecasts for 2010-2011 up by 8-10% and 55-58% respectively. Lower risk-free rate and risk premium assumptions also raised our TP from Rp2,555 to Rp3,000, reiterating our BUY rating. Our new TP offers 11.1% potential upside and but implies undemanding valuations of 11.5x-11.1x 2010-2011 PER and 3.29x-2.86x 2010-2011 PBV, still the cheapest amongst its peers.
12M09 Results Exceeded Expectations
12M09 results were lower compared to 12M08 but exceeded our expectations due to better operational margin. Lower tin prices of 27% YoY resulted a decline in revenues of 15% YoY to Rp7,710bn. Dragged by forex loss of Rp120bn, net profit dropped 77% YoY but grew 11% QoQ on continued recovery of tin prices and stronger margins, which are attributable to higher offshore production and restructuring of employees.
Go Offshore, Go Deeper
TINS has been shifting towards higher offshore production, where it contributed 48.3% to total tin-in-concentrate production. In addition to having over 30 contractor-owned dredges operating, it is adding 5 cutter suction dredges (CSD) in 2010 to its current fleet of 10 (Rp25bn each). TINS will also have two bucket wheel dredges to start operating at the end of 2011. Higher offshore production yields higher margin when prices rise and allows the company to minimize illegal mining on its mining leases.
Striving for Higher Margin
TINS strives to generate higher margin by selling more premium products and by developing downstream products such as tin solder and tin chemical. The tin solder factory built in Kundur by April 2009 has a capacity of 2,100mtpa, which will increase to 4,200mtpa in 2012. Construction of a tin chemical factory in Cilegon, Banten is expected to start operations by 2H10 with annual capacity of 10,000mtpa, to be expanded to 30,000mtpa in 2013. However, in the absence of details regarding the pricing and cost structure, we have not factored in the tin chemical business, which should potentially raise TINS’s valuation.
Demand to Exceed Supply
Limited global output, together with stronger demand from global economic recovery, has driven tin prices up by 12% YTD to US$18,895/mt. Global tin consumption in 2010 is expected to increase by 7.9% YoY to 329,200mt, driven by consumer purchasing power recovery for electronic and consumer goods products. Tin supply is expected to fall short at 322,500mt, pushing tin market into a deficit and potentially driving prices further up.
Tidak ada komentar:
Posting Komentar