Timah posted FY09 net income of Rp314bn (-76.6%yoy, +11.4%qoq), in line with our estimates, but 9.1% higher than consensus. The 6.0% sales volume growth slightly negated the negative effects from the 26.5%yoy ASP contraction. For the first time, Timah was able to achieve more than 30% tin ore contribution from cheaper offshore mining (with 48% contribution). Going forward, we expect Timah to book 267% FY10F EPS growth, supported by higher ASP, stable sales volume, cheaper tin ore sourcing, and additional margin from tin derivative products. We maintain our Buy stance on TINS with TP of Rp3,000/share, providing 29.0% upside potential from the current price.
FY09 results were in line with our estimate, but above consensus. Timah posted FY09 revenue of Rp7.7tn (-14.8%yoy, +9.0%qoq). The on-year decline in revenue was due to the 26.5% lower ASP, but slightly offset by 6.0% sales volume growth, and rupiah’s 7.9% depreciation (exports represented 97.3% of total sales). The revenue contraction resulted in net income of Rp314bn (-76.6%yoy, +11.4%qoq). However, these results were in line with our estimates, yet 9.1% higher than consensus estimate.
Successful cost-reduction program in FY09. Despite the deteriorating yoy performance, 2009 qoq performance gradually improved with net margin increasing from 0.9%-1.5%-6.4%-6.6% for the period of 1Q09 till 4Q09, respectively. In addition to higher ASP, the improvement was also supported by cheaper cost in tin ore sourcing from offshore mining that contributed some 48% to total tin ores in FY09 (vs 29% in FY08). The company expects to maintain the similar proportion in 2010 by operating at least 4 new cutter suction dredge ships.
Robust growth in 2010. Our expectation on better FY10F performance, EPS growth of 267%yoy, is mainly due to stronger ASP with 1Q10F ASP of $17.1k/ton (+12.8%qoq). From sales volume side, the company is targeting to maintain a maximum of 50k tons in order to support sustainable world tin price. Future earnings catalysts will come from (1) additional margin from derivative products sales, solder and tin chemical and (2) potential cost saving from offshore and onshore mining if subcontracting termination process goes! well.
Reiterate Buy. We maintain our Buy stance as the company showed progress in (1) cost efficiency by building more ships for offshore mining, (2) shifting to higher margin products, solder and tin chemical, and (3) cheapest valuation among our metal counters at PER10-11F of 10.2-6.8x. We maintain our TP at Rp3,000/share.
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