ITMG is Indonesia's third largest listed coal company in Indonesia, in term of volume. The company operates five coal mines in Kalimantan, with total reserves of 312m tons in 2008. It produces 20mt in 2009 and plans to ramp output up to 27mt by 2012. It exports 93% of its coal. Banpu is the largest stakeholder with 73.72% stake.
Despite having one of the smallest reserves among the Indonesian coal producers, ITMG has one of the most visible production profiles (2008-11 CAGR of 15%) over the next few years.
ITMG is in a position to acquire to further boost its production volume with over US$400mn in net cash.
ITMG can also surprise further on its reserves and profile as it begins negotiations on a Greenfield project in the East Kalimantan region which could add another 3mt/yr in production.
Target price of IDR 39,270 based on 11.5x 11 PER. Buy below IDR34,148.
Risks: Coal prices fluctuations, regulatory changes in Indonesia, incl expiration of mining licenses, disruptions to operations and/or projects under development, poor weather, acquisition risks.
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