• Antam may have found a partner for its alumina project as Nalco, an India SOE for aluminum sector, is currently seeking to enter alumina business in Indonesia Nalco is aiming to form a partnership with Antam as Antam owns an ample bauxite reserve in West Kalimantan.
• Bauxite is the main material for alumina where 2 tons of bauxite is required to produce 1 ton of alumin. Nalco aims to produce more than 2mn tons of alumina and would require 4mn tons of bauxite each year.
• Separately, the Government of Indonesia has refused to renew contract with Japan in Indonesia Asahan Aluminium (Inalum). The Government is encouraging Antam to take over the contract in 2013 as the company has the capability to run this integrated aluminum facility.
• Overall, there are more rooms for Antam to expand its business, however, we still prefer the company to execute its FeNI IV project in Halmahera as this project may help to boost the company’s ferronickel production as well as utilizing its reserve in Halmahera.
• Currently ANTM is trading at 2010F PER of 18.2x and EV/EBITDA of 9.6x, Buy.
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