NISP TB Bukit Asam signs new project (PTBA, Rp16,700, Buy)

• TB Bukit Asam has signed an agreement for its new railway project that will connect Tanjung Enim and a new port at Tanjung Api Api, South Sumatera. This 270km railway project involves TB Bukit Asam, Adani Group and South Sumatra Provincial Government. Adani is an India based company specializing in power, infrastructure, global trading, logistics and energy.

• This is a completely new project apart of the company’s railway project with Rajawali and China Railway Engineering. This project will connect Tanjung Enim to Palembang, while project with Rajawali and China Railway Engineering connects Tanjung Enim with Lampung.

• From the brief explanation, we find that Adani will provide the whole US$1.65bn funding, which makes the group own 98% stakes in this project. TB Bukit Asam will supply the 34mn tons coal per year through this new infrastructure.
However, there are no further explanations explaining whether Adani has exclusive right for the coal or will only collect the fees from the railway, uploading and unloading activities and port fee.

• Initial estimates showed this project will be able to bear 34mn tons capacity and will commence in 2014. Hence, this is positive for TB Bukit Asam as it would make the company one of the largest coal producers in Indonesia. In addition current existing projects already bear 60.7mn tons coal capacity per year. With this new project, the company’s maximum logistic capacity will reach 94.7mn tons, which will provide access to TB Bukit Asam’s abundant reserves.

• Currently PTBA is trading at 2011F PER of 13.2x and EV/EBITDA of 11.6x, Buy.

NISP TB Bukit Asam obtains new partner for Banko Tengah (PTBA, Rp16,350, Buy)

TB Bukit Asam is reported to have obtained a partner for its 4x600 MW mine mouth power plant project at Banko Tengah. The partner is Lanco Infratec, one of the largest infrastructure companies in India. Despite no confirmation, PTBA admits that it is currently planning to develop a US$3.0bn power plant project in Tanjung Enim.

Previously, the project is in Power Purchase Agreement (PPA) phase, with PLN acting as buyer for this 12mn tons annual coal consumption project. Current partners are China Huadian, PLN, Truba and local government.

We still wait for the update of this project, as along with Banjarsari mine mouth power plant and new railway projects, the project will be the key driver for TB Bukit Asam’s growth in the future.

Currently PTBA is trading at 2011F PER of 12.9x and EV/EBITDA of 11.4x, Buy.

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.

Mansek Indocement:To build new plant (INTP,Rp16,150,Neutral,TP:Rp16,600)

Aside from the new 1.5mn tons cement mill which will start operating this month,they will build another cement mill in Citeureup with a total investment cost of around US$300-450mn.This is sooner than their previous plan,given unexpectedly strong demand.They previously mentioned that new plant will have a capacity of 2-3mn tons/year.

As for this year,they budgeted around US$75mn for FY10 capex,which some US$18.7mn has been spent in 1H10.Other than that,the company will also build its own power plant with a capacity of 2X50MW.On valuation basis,the company is currently trading at PER10F of 17.7x (vs average peers of 16.5x).

Mandiri Sekuritas Indocement TP: 1H10 net profit grew 39.9% yoy, slightly higher than expected (INTP, Rp16,850, Neutral, TP: Rp16,600)

Domestic sales volume grew 17.3% yoy, which was higher than total revenue of only 11.8% yoy. This shows that average selling price was lower. However, margins improved, thus net profit increased by 39.9% yoy. Overall, FY09 result is inline with our and consensus estimates. Currently INTP is trading at EV/ton and PER10 of US$335 and 18.5x, respectively.

Danareksa Bukit Asam (PTBA IJ, Rp16,800 BUY) Set to improve

Earnings trimmed but still a BUY with a TP of Rp19,200
We adjust our coal sales forecast, ASP, stripping ratio and capex for 2010F, to take into account PTBA’s lower-than-expected 1H10 results. As a result, our FY10F EPS forecast is trimmed by 8.2% to Rp956/share. Nonetheless, we still believe the stock offers good value as the company’s long-term prospects are rosy. Besides revising our assumptions, we also extend our 12-month TP, resulting in a new TP of Rp19,200, implying FY11F P/E of 14.4x. The stock offers 14% upside from the current share price.

1H10 results below expectations
PTBA’s 1H10 net income is below expectations. Production volume reached 5.8Mt or 44.1% of our initial full year forecast, while sales volume reached 6.5Mt or 43.8% of our initial full year forecast. The 1H10 domestic ASP reached Rp601.1k/t, while for exports the ASP was USD61.15/t. All in all, the 1H10 ASP were lower than our expectation. This reflects the lower-than-expected contract prices for the Tarahan and Bukit Asam power plants, and also the higher proportion of sub-bituminous coal the company is selling.

Coal sales target toned down
We trim our 2010F coal sales target to 14.1Mt, or down 4.2% from our previous forecast. Note the company has also reduced its FY10F coal sales target. This downgrade reflects the problems in railway transportation and the repairs at the unloading facility at the Tarahan Port that were borne by PTBA in 1H10. Although PTBA expects the unloading facility to be fully repaired by the end of September 2010, we expect the railway problems to continue in the near future – thereby affecting PTBA’s ability to transport coal from its pits to the port.

Export ASP expected to pick up in 2H10
Our ASP for FY10F domestic sales are trimmed to Rp629.3k/t as lower-than-expected contract prices for the Tarahan and Bukit Asam power plants have been finalized. At the same time, our 2010F ASP for exports remain unchanged at USD67/t. However, given that the export ASP in 1H10 were only USD61.15/t, ASP should be much higher in 2H10 as PTBA has committed itself to delivering 75-80% of its export volume for FY10F at an ASP of $70-72/t - as of yet only small portion delivered.

Mansek PTBA Below consensus –Export,the determinant for 2H (PTBA,Rp16,500, Neutral TP IDR 18.750

With volume achieved only 44.1%of the total company estimate for FY10, and domestic prices contract short of our expectation of Rp685,000/ton (PLN blended contracts :Rp635,100/ton),hopes for PTBA ’ s earnings improvement should be coming from the export.Export needs a boost. Export in 2Q10 was just 0.9Mt (1Q10:1.3Mt).Assuming most of domestic is aimed for PLN,PTBA has to export 5.0Mt in 2H,more than double the
amount in 1H. PTBA aims high in the export,with 20-25%spot transactions and calorific value of 6,700-7,000 kcal,earnings performance is really dependent on the achievement of its sales department.At Rp16,500,is trading at 14.4x and 11.8x,PER10F and PER11F,respectively.

We ’re revising down our forecast to reflect the domestic price.Our preliminary calculations on the new forecasts expect net income at around Rp2.2tn,a 16%downward adjustment.We will review our recommendations and target price.

Mansek Bukit Asam :A lot of catching up to do (PTBA,Rp16,550,Neutral,TP:Rp18,650)

Bukit Asam announced its new contract price and amount for PLN power plants,Tarahan and Bukit Asam.Tarahan will received 750k tons at Rp570,000/ton and Bukit Asam will receive 1.1Mt at Rp430,000/tons.With this announcement PTBA has settled all the contracts with PLN including January 21,2010 contract to supply Suralaya power plant 5.5Mt at Rp685,000/tons.With the contracted amount and prices with PLN,we expects PTBA has a lot to catch up on the export front

Catching up the volume.With PLN contracted amount and export in 1Q10 (we assume no domestic sales aside from PLN in 1Q10),PTBA has to find market for its 6,978k tons of coal.This assumed PTBA will fulfill its 15.6Mt of FY10 sales guidance.Can they make it since 1Q10 they only sold 3.2Mt (20.5%of FY10 guidance)and April sales is only 828k tons. Based on April 2010 sales volume it will be tough to maintain guidance.

And also ASP.We also estimated that PTBA need to have an ASP of US$63.6/ton for its remaining volume.Can they achieve it,considering ASP 1Q10 for export is just US$57/ton.That also assumed that all the remaining volume is for export which is usually have higher price.PTBA mentioned that 1Q10 export was mainly on coal with 5,900 kcal,and expect to send higher calorific coals in the future.Based on these recent data,we conclude that there is likelihood of downward adjustments in consensus forecast.

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.