· ITM is currently chasing for 23mn tons coal production for 2010 by optimizing its water management to support production amid heavy rainfall season. The company elaborated that it will optimize water pump facility and avoid catchment area through developing drainage system.
· This 23mn tons is inline with the company’s previous guidance, however, we foresee that the company will face challenge on its way to achieve another 12mn tons in 2H10. During 1H10 the company produced 11mn tons of coal where its 2Q10 was only 5mn tons or a bit lower than 6mn tons in 1Q10 due to rainfall season.
· Its high stripping ratio characteristic would also become a challenge in this unusually wet season, where this was already spotted in the company’s 2Q10 cash cost per ton, which rose by 16.1% QoQ.
· Currently ITMG is trading at 2011F PER of 14.3x and EV/EBITDA of 8.6x, Hold.
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