DBS Bukit Asam: Buy; Rp19,900; TP Rp21,350; PTBA IJ

To conduct stock split

Bukit Asam (PTBA) is considering a stock split to improve liquidity of the stock. The stock split plan may serve as a short term catalyst for retailers even though it would not have any impact fundamentally. Details of the plan are yet to be explained. 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 . The company offers attractive FY09-14F production growth of 26%p.a. once its logistic bottleneck is removed. PTBA is currently priced at 13.4 FY11F PE

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.

DBS Bukit Asam: Buy; Rp16,700; TP Rp21,350; PTBA IJ

Negotiates higher than expected coal price

Perusahaan Listrik Negara has agreed to pay Rp570,000/ton (+8.6%yoy) for 750,000 tons of coal delivered to Tarahan power plant and Rp430,000/ton (+5.5%yoy) for 1.1m tons of coal delivered to Bukit Asam power plant this year. The combined coal supplies equal to 12% of our FY10F target sales volume of 15m tons.

The agreed price is 16% and 13% higher than our price assumption of Rp490,000/ton and Rp381,000/ton respectively. Imputing the number into our model, we estimate average selling price (ASP) to increase by 1.7% to Rp633,000/ton (US$70/ton) and will increase net profit by 4% to Rp2.8t. We maintain our number at the moment, waiting for 2Q10 result to be released by the end of the month.

Maintain Buy, TP of Rp21,350/share offering 28% upside potential.