Danareksa Bukit Asam (PTBA IJ, Rp16,800 BUY) Set to improve

Earnings trimmed but still a BUY with a TP of Rp19,200
We adjust our coal sales forecast, ASP, stripping ratio and capex for 2010F, to take into account PTBA’s lower-than-expected 1H10 results. As a result, our FY10F EPS forecast is trimmed by 8.2% to Rp956/share. Nonetheless, we still believe the stock offers good value as the company’s long-term prospects are rosy. Besides revising our assumptions, we also extend our 12-month TP, resulting in a new TP of Rp19,200, implying FY11F P/E of 14.4x. The stock offers 14% upside from the current share price.

1H10 results below expectations
PTBA’s 1H10 net income is below expectations. Production volume reached 5.8Mt or 44.1% of our initial full year forecast, while sales volume reached 6.5Mt or 43.8% of our initial full year forecast. The 1H10 domestic ASP reached Rp601.1k/t, while for exports the ASP was USD61.15/t. All in all, the 1H10 ASP were lower than our expectation. This reflects the lower-than-expected contract prices for the Tarahan and Bukit Asam power plants, and also the higher proportion of sub-bituminous coal the company is selling.

Coal sales target toned down
We trim our 2010F coal sales target to 14.1Mt, or down 4.2% from our previous forecast. Note the company has also reduced its FY10F coal sales target. This downgrade reflects the problems in railway transportation and the repairs at the unloading facility at the Tarahan Port that were borne by PTBA in 1H10. Although PTBA expects the unloading facility to be fully repaired by the end of September 2010, we expect the railway problems to continue in the near future – thereby affecting PTBA’s ability to transport coal from its pits to the port.

Export ASP expected to pick up in 2H10
Our ASP for FY10F domestic sales are trimmed to Rp629.3k/t as lower-than-expected contract prices for the Tarahan and Bukit Asam power plants have been finalized. At the same time, our 2010F ASP for exports remain unchanged at USD67/t. However, given that the export ASP in 1H10 were only USD61.15/t, ASP should be much higher in 2H10 as PTBA has committed itself to delivering 75-80% of its export volume for FY10F at an ASP of $70-72/t - as of yet only small portion delivered.