Indo Tambangraya (ITM IJ) is one of the companies attending our CLSA Corp Access Forum in Singapore (20-22 May 09) and they will have a workshop session today. ITMG is Olie’s favorite stock in the resource sector. In fact, ITMG is the only BUY in his coverage universe. This stock is also my entry in our internal stock picking competition for 2Q09.
ITMG is the 4th biggest coal company in Indonesia, producing 17.7mn tonnes in 2008. It has sizeable resources totaling 1.7bn tonnes, and decent reserves of 312mt. The company has built a reputation as a reliable supplier to customers and as a company with credible CG.
ITMG’s earnings are highly sensitive to the price movements of thermal coal. Export portion and cost structure are high, hence the operating leverage (and btw, the other coal name that is highly sensitive to thermal coal price is BUMI).
Tampilkan postingan dengan label ITMG. Tampilkan semua postingan
Tampilkan postingan dengan label ITMG. Tampilkan semua postingan
Minggu, 24 Mei 2009
Kamis, 26 Maret 2009
Credit Suisse ITMG, What if coal price stays lower for longer?
PT Indo Tambangraya Megah (ITMG.JK, Rp9,800, O, TP Rp17,000) - What if coal price stays lower for longer?
Paworamon (Poom) Suvarnatemee, CFA / Research Analyst / 662 614 6210 / paworamon.suvarnatemee@credit-suisse.com
We have evaluated the downside risks to ITMG’s earnings and valuation, in case coal prices continue to stay low or fall even lower than the US$75/tonne price in FY10.
Risks to our FY09 forecast are low, as 70% of ITMG’s volumes have already been priced. Risks are higher in FY10, as the volumes are yet to be priced. We see 51% earnings downside from our forecast, if benchmark prices fall to US$75/tonne in FY10 (from the current assumption of US$100/tonne). At US$50/tonne benchmark, ITMG would be making loss, unless costs are cut by 10%.
We doubt that benchmark price would fall as low as US$50/tonne, given that major Indonesian players would lose money. Cash cost of Russian producers are also believed to be in the range of US$60/tonne.
We maintain our OUTPERFORM rating. Even with the flat coal price at around US$75/tonne in FY10, its P/E is still undemanding at 7x and free cash flow remains positive. We see its net cash position, and willingness to pay dividend, as a cushion to share price. Our forecast is revised down slightly, reflecting small change in price assumptions.
Paworamon (Poom) Suvarnatemee, CFA / Research Analyst / 662 614 6210 / paworamon.suvarnatemee@credit-suisse.com
We have evaluated the downside risks to ITMG’s earnings and valuation, in case coal prices continue to stay low or fall even lower than the US$75/tonne price in FY10.
Risks to our FY09 forecast are low, as 70% of ITMG’s volumes have already been priced. Risks are higher in FY10, as the volumes are yet to be priced. We see 51% earnings downside from our forecast, if benchmark prices fall to US$75/tonne in FY10 (from the current assumption of US$100/tonne). At US$50/tonne benchmark, ITMG would be making loss, unless costs are cut by 10%.
We doubt that benchmark price would fall as low as US$50/tonne, given that major Indonesian players would lose money. Cash cost of Russian producers are also believed to be in the range of US$60/tonne.
We maintain our OUTPERFORM rating. Even with the flat coal price at around US$75/tonne in FY10, its P/E is still undemanding at 7x and free cash flow remains positive. We see its net cash position, and willingness to pay dividend, as a cushion to share price. Our forecast is revised down slightly, reflecting small change in price assumptions.
Langganan:
Postingan (Atom)