JP Morgan - PTBA

The good news: Rajawali Group took over Suganda's 100% stake in TRI (Transpacific Railway Infrastructure) , which owns an 80% stake in BATR (Bukit Asam Transpacific Railway). Rajawali has a good execution track record. The bad news: corruption allegation over floating crane project, involving two directors: Milawarma (operational director) and Tiendas Mangeka (marketing director). JPMorgan research rates O/W. According to Stevanus Juanda (analyst), the railway project and the Transpacific related coal sale could add around US$1.37bn to PTBA's existing operation NPV of US$3.54bn (versus current market cap of US$4.6bn). The stock trades on 16.3x and 12.7x P/E 2010-11.