NISP TB Bukit Asam signs long term contract with PLN (PTBA, Rp18,900, Buy)

· TB Bukit Asam signed a 20-year contract to supply an additional 14.5 million tons of coal a year to Perusahaan Listrik Negara (PLN). TB Bukit Asam currently supplies 8.1mn tons coal to PLN, 6.1mn tons of which are conveyed to Suralaya power plant and the balance are for Tarahan and Bukit Asam power plants.
· TB Bukit Asam added that it will start to fulfill the contract after the company completed its railway project in order to boost logistic capacity.
· There is no further explanation when this contract will be started, however, we foresee this is prepared to support PLN’s 10,000 MW project.
· Nevertheless, despite no further details, we see this contract is very positive for TB Bukit Asam. With this secured demand for its coal, the company’s railway projects are becoming bankable where the company could utilize the contract to obtain financing to support the projects.
· Currently, PTBA is trading at 2011F PER of 14.9x and EV/EBITDA of 12.9x, Buy.

BNPP Bank Negara Indonesia - Government sold 3.1% stake at IDR2,900

The government sold 473.89m shares (3.1% stake) of BNI yesterday of which 70% was allocated to domestic and 30% to foreign investors. At IDR2,900 the government will collect IDR1.374t (USD152m) which will be used to help finance the state budget deficit.

Comment: This puts the bank valuation at around 2x P/BV 2010E compared to the industry average of 3.2x. Post the divestment the government still owns 73.1% of the bank, which plans to raise at least IDR6t through the rights issue by the year-end. It is expected that the government will not take their rights and to dilute their state further to 60% which will allow BNI to utilise the corporate income tax benefit (lower income tax to 20% from 25%) for companies with free float of >40%.

JPM PT Aneka Tambang Tbk Lower-than-expected 1Q10; reduce PT to Rp2,900

• 1Q10 net income grew strongly Y/Y but below expectations: ANTM reported 1Q10 net profit of Rp202B, up by a strong 124.7% Y/Y. With 1Q historically contributing to an average of 23.4% of full year net income, 1Q10 net income came in below both our (14.3%) and consensus (15.6%) full year forecasts of Rp1,417B and Rp1,297B respectively. The lower-than-expected profit was driven by lower-than- expected volume and higher SGA costs.

• Contribution from mining activities improved: The gross margin improved from 6.1% in 1Q09 to 28.7% in 1Q10 despite declining Y/Y sales. The reason for this is that ANTM decided to limit its gold trading activities, which carry a minimal margin, and focused on high-margin
mining activities. ANTM’s nickel operation swung from a loss of Rp29B in 1Q09 to a profit of Rp308B in 1Q10.

• Model revisited and earnings adjusted downwards: With the lower volume and higher costs delivered in 1Q10, we revisit our model and incorporate the 1Q10 result into our forecast. In our revised model, we do not adjust the selling price but we adjust volume downwards and
SGA cost upwards. These result in us lowering FY10E net income by 12.2% and long-term earnings (10-year average until FY20E) by an average of 9.4%.

• Maintain OW and lower our PT to Rp2,900: The reduction in earnings forecasts caused us to lower our SOTP-based Dec-10 price target from Rp3,200 to Rp2,900. However, with an ample 18.3% upside still implied by our price target and potential positive momentum on metal prices, we maintain our OW rating on ANTM. Key risks to our price target include:
(1) an unexpected decline in nickel prices; (2) smaller-than-expected cost
decline.

NISP TB Bukit Asam has received loans commitment (PTBA, Rp17,900, Buy)

• TB Bukit Asam’s has received loans commitment to support its plan on Banko Tengah mine mouth power plant project. The company said that currently one overseas bank from China has agreed to support this US$3bn project and ready to provide up to 70% of funding.

• With this support, the company still has one more agreement that needs to be settled, which is the power purchase agreement to PLN.

• The company aims to commence the project in 2014 which will contribute an additional 12mn tons of coal sales per annum. As such, the company’s coal sales volume in 2014 would reach more than 40 mn tons, supported by the existing railway capacity of 22.7mn tons, the commencement of new railway of 7mn tons and this mine mouth power plant.

• TB Bukit Asam also has another mine mouth power plant project, which is Banjarsari, with coal consumption of 1mn tons per year. This project is also in negotiation phase with PLN regarding the electricity tariff.

• All in all, TB Bukit Asam has the driver to boost sales volume and also backed by healthy financial structure and favorable cash turnover. Thus, with current 2010F valuation PER of 17.8x and EV/EBITDA of 15.4x, we still maintain Buy.

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 Astra International Buy, TP:idr17,900

Astra International: Multi finance unit plans Rp500bn-Rp750bn bond offer (ASII, Rp11,850, Buy, TP:Rp17,900)

Astra’s multi finance unit, Astra Sedaya Finance, plans to float Rp500-Rp750bn worth of bonds to expand its financing
fund allocation to Rp12.5tn in 2009. This year’s budget is about 9.4% lower from last year allocation of Rp12.5tn. The
company aims to finance some 95-100k car units of which 60k-65k are planned for brand new units, which accounts
for about 13.3%-14.4% of our FY09F domestic car sales of 450k units (-25.9%yoy).

We maintain Buy for Astra International, which now trades at PER09F 6.0x. Our TP still offers a 51% upside.