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.

Mandiri Sekuritas Indika Energy: 1Q10 net income above ours and consensus (INDY, Rp3,050, Buy, TP: Rp2,750)

Indika posted net earnings of Rp292bn, a 35% drop yoy, which was mainly due to the added interest burden coming from its US$255mn bonds issue late last year. Despite the drop, net income was above ours and consensus estimates.

There were significant improvements at operating level (non coal production) with operating income growing 7-folds (albeit a low base in 09), with the full contribution of Petrosea as well as that of Tripatra. We have reason to believe that Indy’s operating performance can improve further with a thicker order book from Tripatra, which is seen to jump over US$800mn spread over until 2014. Possible upgrade likely due to better operating performance rather than an upside on coal production. Currently the stock trades at PER10F of 18.6x.

Mandiri Sekuritas PTBA: 1Q10 net income at Rp373bn, below ours and consensus estimates (PTBA, Rp19,000, Buy, TP: Rp18,750)

􀂄 PTBA posted 1Q10 net income of Rp337bn (-59.5%yoy, -25.3%qoq), below ours and consensus estimates. YoY decline was due to lower ASP, while volume up by 14%yoy. Lower ASP was due to product mix shift to low quality coal in 1Q10.
􀂄 1Q10 sales volume of 3.2mn tons represented 21% of our FY10F estimates
􀂄 We still have Buy recommendation on PTBA which currently is trading at PER10-11F of 14.91-13.5x.

Mandiri Sekuritas Bukit Asam : Bukit Asam, China Private Equity Funds in Talks on Sumatra Railway (PTBA, Rp17,900, Buy, TP: Rp18,750)

􀂄 PTBA on Wednesday said two China-based private equity funds were in talks about partly funding a $1.3 billion coal railway in Sumatra. Last month, PTBA signed contracts for a total of $4.8 billion for a new rail project to transport its coal to a port in Sumatra, a deal that is expected to increase PTBA’s coal-transportation capacity significantly. The deal consisted of a US$1.3bn contract for the construction of a new rail line and an operation and maintenance contract worth US$3.5bn over 20 years, both with China Railway Engineering Corp. The project involves the construction of a 307- kilometer railway from Bukit Asam’s Banko coal mine in South Sumatra to the port of Srengsem in Lampung province. Together with the
improvement in existing railways, PTBA expects to produce 48Mt in 2014 compared to their 2010 estimate production of 15.5Mt

􀂄 PTBA’s CEO Sukrisno said the railway consortium was in talks with private equity funds including two China-based investors — Beijing-based Hopu Investment Management and a private equity unit of China Development Bank — for the $1.3 billion project. China Export-Import Bank has been chosen as the main financier for the project, he said.

􀂄 The consortium had agreed to increase the debt portion of the project to 85% from 70 %, China Railway said it needed six months for design and therefore project construction is estimated to start in 1H2011. Privately owned PT Trans¬pacific Railway Infrastructure owns 80%, while Bukit Asam and China Railway Engineering Corp. each own 10%. (Jakarta Globe)

􀂄 PTBA is also planning to pay a dividend of Rp466/share in June 15, as final dividend for 2009 result, as previously they have paid Rp67/share. Total dividend payout is 45%. PTBA expect a weaker than 1Q09 revenue achievement in 1Q10 due to lower price. PLN paid PTBA Rp685k/ton for 5.5Mt coal delivery in 2010, 22.5% lower than price they paid in 2009 for 6.1Mt. PTBA booked Rp2.3tn of revenue in 1Q09. We are forecasting Rp10.2tn revenue for FY10 (FY09A: Rp8.9tn). We are expecting prices to recover in the following quarters and a 23% increase in the sales volume to 14.8Mt. At Rp17,900/share, PTBA is trading at 14.0x and 12.7x PERFY10F and PERFY11F, respectively.

Mandiri Sekuritas Bukit Asam: Bukit Asam : Conclude the EPC agreement with China Railway (PTBA, Rp16,350, Buy, TP:Rp18,750)

􀂄 China Railway Group said on Thursday that it had won an Indonesian coal transport contract worth US$4.8bn. China Railways will be responsible for the design, construction and maintenance of the South Sumatra project, with design and construction priced at US$1.3bn and maintenance at US$3.5 bn. The contract with Indonesia's Bhakta Hill Pan Pacific Railway Corporation includes four years of construction with an operational period of 20 years, the company said. (Reuters)

􀂄 We will further seek information from Bukit Asam regarding the contract, proposed financing, and the existence of Bhakta Hill Pan Pacific. Previously it was understood that Transpacific, PTBA partners in the project would team up with Prayogo Pangestu from Barito Pacific. We consider the appointment of EPC contractor, is a positive step forward in the long awaited progress on the deal. The project calls for construction of a 300- kilometer railway from Bukit Asam’s Banko coal concession in South Sumatra to Srengsem Port in Lampung. It has been stalled since 2007, when Bukit Asam, Transpacific Railways and China Railway Engineering formed a
joint venture company named PT Bukit Asam Transpacific Railway to develop the project. It finally approved by the Transportation Ministry in October 2009. In its full capacity, the railway could carry 20Mtpa of coal, an increase from PTBA 2009 production of 11.6Mt. At Rp16,350, PTBA is traded at PER10F and PER11F of 12.8x, and 11.6x, respectively.

Mandiri Sekuritas Indika Energy: FY09 net earnings at seen at Rp725bn, slightly below our targets (INDY, Rp2,250, Buy TP: 2,750)

􀂄 The company indicated that FY09 net income is expected as some Rp725bn (-33%yoy) which came slightly below our forecast of Rp761bn and consensus of Rp842bn. However, on operating level, the company improved with revenues of Rp2.5tn (+7%yoy) and operating income of Rp191bn (+55%yoy). Likewise, income from associated companies jumped by 44% to Rp1.5tn, primarily due to the contribution from its 46% coal unit Kideco, which generated FY09 net profit of US$288mn, which came in 8% higher than our targets. We suspect higher interest and one-off charges were the main reason for the drop in bottom-line.

􀂄 We remain a buyer on the company with FY10F net earnings seen at Rp855bn (+18%yoy) on the back of (a) higher coal production (b) better contribution from operating units Petrosea and Tripatra as a result of thicker order book. Currently, the stock trades at PER10F of 13.7x.