1Q10 result is below expectations: PTBA reported 1Q10 net income of Rp373B; down 59.5% Y/Y and down 25.3% Q/Q. With historically, 1Q has contributed to an average of 26.0% to full year profit, PTBA’s 1Q10 result came in lower than both JPM (14.7%) and consensus’ (13.8%) full year forecast of Rp2.535 trillion and Rp2.707 trillion respectively.
Lower export ASP and peak 1Q09 net income are the main cause: The cause of the weak 1Q10 results are: (1) The ASP at the export market (41% of volume) declined by 40.5% Y/Y from US$95.9/ton to US$57.0/ton – due to more shipments of more lower calorific value coal and lower Y/Y coal price. (2) Earnings peaked in 1Q09 of Rp920.6B – 35% higher than the average quarterly earnings of Rp681.9B in FY09: magnifying the Y/Y decline. (3) Domestic selling price at PLTU Suralaya declined by 22.5% from Rp884,000/ton to Rp685,000/ton.
Operation should improve going forward: We view that the weak 1Q10 result could be the bottom, caused by the effect of the low coal price in 1H09. With coal prices continuing to rise to currently above US$100 and the plan to shift product mix from sub-bituminous to bituminous starting 2Q10, we view that PTBA’s operation should improve going forward. In addition, we view that the FY10E signing price at PLTU Bukit Asam and PLTU Tarahan could rise on a Y/Y basis, as in the past year, the selling price has remained low at Rp407,500 per ton and Rp524,000 per ton. Finally, the progress on Transpacific railway continues to progress well with the recent investment by Rajawali.
Buy on weakness. Maintain OW and PT of Rp26,000: We view that the share price could be under pressure short term due to the 1Q10 earnings. However, considering the potential improvement in operations going forward, and continued positive progress on the Transpacific railway, we see weakness in the share price as an opportunity for
investors to establish positions. Maintain OW & Dec-10 PT of Rp26,000.
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