DBS Indo Tambangraya: Hold; Rp40,000; TP Rp38,700; ITMG IJ

Higher than expected dividends

Indo Tambangraya Megah (ITMG) announced that the company will distribute US$100m (75% of 1H10 net profit) in interim dividends. This would translate to DPS of Rp795 or 2% yield. Ex-dividend date will be on 29 September and payment date on 15 Oct 2010. We maintain our ITMG’s FY10 payout ratio of 60% for now, translating to a total dividend payment of Rp1,582/share based on estimated FY10F earnings of US$332m. Nevertheless, a high payout ratio of 75% for 1H10 may indicate that ITMG’s acquisition plan may not materialize in the near term.