Mandiri Sekuritas Bukit Asam : Bukit Asam, China Private Equity Funds in Talks on Sumatra Railway (PTBA, Rp17,900, Buy, TP: Rp18,750)

􀂄 PTBA on Wednesday said two China-based private equity funds were in talks about partly funding a $1.3 billion coal railway in Sumatra. Last month, PTBA signed contracts for a total of $4.8 billion for a new rail project to transport its coal to a port in Sumatra, a deal that is expected to increase PTBA’s coal-transportation capacity significantly. The deal consisted of a US$1.3bn contract for the construction of a new rail line and an operation and maintenance contract worth US$3.5bn over 20 years, both with China Railway Engineering Corp. The project involves the construction of a 307- kilometer railway from Bukit Asam’s Banko coal mine in South Sumatra to the port of Srengsem in Lampung province. Together with the
improvement in existing railways, PTBA expects to produce 48Mt in 2014 compared to their 2010 estimate production of 15.5Mt

􀂄 PTBA’s CEO Sukrisno said the railway consortium was in talks with private equity funds including two China-based investors — Beijing-based Hopu Investment Management and a private equity unit of China Development Bank — for the $1.3 billion project. China Export-Import Bank has been chosen as the main financier for the project, he said.

􀂄 The consortium had agreed to increase the debt portion of the project to 85% from 70 %, China Railway said it needed six months for design and therefore project construction is estimated to start in 1H2011. Privately owned PT Trans¬pacific Railway Infrastructure owns 80%, while Bukit Asam and China Railway Engineering Corp. each own 10%. (Jakarta Globe)

􀂄 PTBA is also planning to pay a dividend of Rp466/share in June 15, as final dividend for 2009 result, as previously they have paid Rp67/share. Total dividend payout is 45%. PTBA expect a weaker than 1Q09 revenue achievement in 1Q10 due to lower price. PLN paid PTBA Rp685k/ton for 5.5Mt coal delivery in 2010, 22.5% lower than price they paid in 2009 for 6.1Mt. PTBA booked Rp2.3tn of revenue in 1Q09. We are forecasting Rp10.2tn revenue for FY10 (FY09A: Rp8.9tn). We are expecting prices to recover in the following quarters and a 23% increase in the sales volume to 14.8Mt. At Rp17,900/share, PTBA is trading at 14.0x and 12.7x PERFY10F and PERFY11F, respectively.