DBS Bukit Asam: Buy; Rp18,900; TP Rp21,350; PTBA IJ

Signs contract for additional coal supply to PLN

Bukit Asam (PTBA) signed a 20-year contract to supply 14.5m tons p.a. of coal to Perusahaan Listrik Negara (PLN) in addition to 8.1m tons p.a. it currently supplies. We understand that PLN is trying to secure coal supply for it’s newly build 10GW new power plants. 75% of capacity should be completed in 2010 and the remaining 25% in 2011/12. We estimate PLN needs 30-35m tons of coal supply for the power plants. We view this as positive as we believe that given its strong position in domestic market, PTBA is set to benefit from surging domestic coal demand from domestic power sector.
We maintain our Buy call for PTBA and Rp21,350/share target price based on blended 13x FY11F PE and 4x PBV. We like PTBA for its strong position in the domestic market and offers attractive FY09-14F production growth of 26%p.a. once its logistic bottleneck removed. PTBA is currently priced at 12.7FY11F PE.