Stock: DOID IJ
Name: Delta Dunia
Price: Rp1,060
Market Cap (bn): Rp7,198
Market Cap (m): US$798
Current valuation (DCF): Rp1,740
12mth price target: Rp1,950
Recommendation: Outperform
Event
Delta Dunia released its 1Q10 financial results with net profit of Rp151bn, up from Rp1bn last year, mainly due to the consolidation of Buma (not listed). On Buma level, it produced a net profit of US$15m, up from around US$6m last year. However, the Buma's results include one-off forex gain amounting to US$6m. Excluding these one-off items, 1Q10 net profit were actually down from US$20m in 1Q09 to US$10m in 1Q10, which is significantly below our forecast of US$15m, largely due to lower coal production and overburden removal as well as lower margin. The net profit figure merely represents 10% and 15% of our and consensus FY10 net profit forecasts, respectively. Key highlights from the results are as follow:
Impact
Weak operation in 1Q10. As we have previously highlighted that as of the 1Q10, the company produced 7.9mt and 62'm bcm overburden (which combined is down about 3% YoY). However, we expect operation to continue to improve during the dry season in Q2-Q3 (this is evidenced by MoM operational improvement in March).
Lower than expected margin hurting 1Q10 financial. The company achieved a net EBIT margin of 21% in the 1Q10, a decline from 24% last year and lower than our 25% forecast. The YoY decline in EBIT margin is due to strengthening Rupiah (15-20% of costs in Rupiah), relatively weak production in 1Q10, and increasing depreciation cost, especially following US$75m capex in 2009 without additional capacity (given that majority of the capex was for replacement). Therefore, we see downside risks to our FY10 net EBIT margin assumptions from 28% towards 24-25%.
Buma's 1Q10 significantly below our and consensus expectation.
1Q10 Buma's net revenue was up 15% YoY from US$110m to US$126m. This is 8% below our expectation as lower than expected operational performance is offset by additional distance (which results in increasing contracting rates).
1Q10 Buma's EBITDA was up 13% YoY from US$45m to US$50m. This is 10% below our expectation due to lower than expected.
1Q10 Buma's EBIT was roughly flat YoY at US$27m, below our expectation of US$35m. This is largely due to higher depreciation charges, which results in lower than expected EBIT margin.
1Q10 Buma's net profit was up 150% YoY from US$6m to US$15m. However, this includes one-off forex gain amounting to US$6m. Excluding these one-off items, 1Q10 net profit were actually down from US$20m in 1Q09 to US$10m in 1Q10, which is significantly below our forecast of US$15m. We therefore see roughly 10-15% downside risks to our FY10 earnings forecast and 20-25% downside to consensus earnings.
Uncertainties causing overhang. We also highlight that uncertainties over the potential Berau acquisition could be an overhang on the stock, such as
We see an increasing risk of Recapital having a substantial ownership in Delta Dunia (20-50%). Should Northstar and minorities give up their portion to the rights issue, we see a risk in that Recapital owns between 20-50% of Delta Dunia. Should this happen, this could lead into Recapital having to do a general offer to Delta Dunia's minority shareholders?
We see the risks of management reshuffle post the transaction at Delta Dunia level.
We see the risks of Delta Dunia refinancing or renegotiating its outstanding bank loan and bond facilities totalling to US$600m. This is as the dilution of Northstar's ownership in Delta Dunia to below 40% will trigger "change of ownership clause", which allows the bond and loan holders to call the facility.
Whilst we see declining risks of Delta overpaying for the acquisition, there are uncertainties on the final ownership structure of Berau (not listed).
Discounted valuation...but for a reason? We acknowledge that the stock's current valuation appears relatively cheap, as it trades on 8.5x and 7.6x PER 2010-11, which is a discount to Pama's implied valuation of 17x and 16x PER (2010-11). However, we highlight the risks of the valuation discount to remain, given the potential of Recapital (not listed - Bakrie related investment house) emerging as a controlling shareholder of Delta Dunia.
Action and recommendation
We therefore see increasing risks to the stock and prefer UNTR (UNTR IJ, Rp19,500, OP, TP:Rp20,500) as a more transparent way to play coal contracting industry, or Banpu (BANPU TB, Bt642, OP, TP:Bt730), SAR (SAR SP, S$2.05, OP, TP:S$3.4), and PTBA (PTBA IJ, Rp18,600, OP, TP:Rp21,300) to play the coal producers.
Tidak ada komentar:
Posting Komentar