Mansek Bukit Asam : New JV with Lanco Infratech – Unlikely to realize ((PTBA, Rp16,350,Buy,TP:Rp18,750)

Investor Daily quoting Business Standard reporting that Lanco Infractech is ready to develop 600MW coal fired power plant in Muara Enim,South Sumatera through a BOT (Build,Operate,Transfer)with PLN, with investment of US$751.3mn in a JV with Bukit Asam.We deemed it is unlikely. Bukit Asam has already a plan to build 4x600MW US$3bn power plant with China Huandian Corp.The problem with its 4x600MW is no take- up in demand in South Sumatera.PLN firstly need to build connecting cable to link Sumatera grid with Java grid,where most of the demand is located.Until the grid plan is developed it is unlikely for the project to start.

At Rp16,360,PTBA is trading at PER10F,and PER11F of 16.9x,and 11.7x, respectively with EV/EBITDA10F and EV/EBITDA11F of 11.1x,and 7.3x, respectively.