· Despite posting 22.0% YoY growth in sales volume, Adaro logged in a disappointing 48.7% YoY decrease in net profit to Rp1.15tn in 1H10 from Rp2.24tn a year earlier. Such decrease was due to three key factors, which are 1) lower ASP, 2) higher direct cost and 3) forex translation on stronger Rupiah. The company’s bottom line came in only 28.9% to our and consensus’ full year expectation.
· During 1H10, the company’s ASP dipped by 10% YoY to around US$61/ton in 1H10 period. However, as the company managed to improve its sales volume by 22.0% YoY on higher coal production, Adaro’s revenue in US$ term increased by 11.9% to US$1,304mn in 1H10 from US$1,165mn a year ago. Nevertheless, stronger Rupiah, which increased by 17.0% YoY to an average of Rp9,189/US$ in 1H10 from Rp11,067 in 1H09, eroded the company’s revenue that was booked in Rupiah to Rp11.95tn from Rp12.90tn in the same period.
· At the same time, higher coal sales caused an extra direct cost of 7.4% YoY to Rp8.0tn, where this was largely due to the increase in planned stripping ratio from 5.0x to 5.5x due to mining the deeper part of the mine as well as the 20% production increase compared to 1H09.
· Such weak condition was also added by higher forex loss and an increase in effective tax rate of 54.4% from 47.1% a year earlier. As such, the company’s bottom line eroded significantly in 1H10.
· On quarterly basis, sales volume was lower due to heavy rainfall and affected the company revenue, which decreased by 9.7% QoQ. This was also added by forex loss and higher interest expense on additional bonds issued last year. Thus, net income plunged by 66.1% YoY.
· In all, despite weak bottom line, the company’s revenue and operating income came in inline with our expectation. The risk is weather condition in 2H10, which may affect sales volume and profitability in the upcoming quarters.
· Currently Adaro is trading at 2011F PER of 11.6x and EV/EBITDA of 5.4x, Buy.
Selasa, 31 Agustus 2010
JPM Adaro Energy (ADRO) – 1H10 net income significantly below expectations
Adaro reported 1H10 net income of Rp1,153 bn, down 48.7%Y/Y. As, historically, 1H contributes 50.8% to the full year forecast, the reported 1H10 net income came in significantly below both JPM's (31.6%) and consensus' (29.6%) forecast of Rp3,648 bn and Rp3,893 bn, respectively. Will revisit model; maintain OW and PT of Rp2,600: Meanwhile, we view that the share price could decline on the back of the weak 2Q10 results. We see risk to our and consensus forecasts; and note that our estimates are currently under review.
JPM Bumi Resources (BUMI) – Bottom-line: 2Q10 results
Bumi Resources (BUMI) – Bottom-line: 2Q10 results not as poor as the read-through from Tata Power’s results (out a few weeks back), that suggested that EBIT may come in flat QoQ. In my own estimate, core net profit (adjusted for FX, one-off gains, and derivatives loss) could be running between US$280-300mn for FY10E, placing the stock on 12-13x P/E. The P/E may look a lot lower if Bumi were to sell its 18% effective stake in PT Newmont Nusatenggara at the price implied by the IPO plan. BUY.
In fact, Bumi reported a 43% QoQ rise in EBIT, as gross margin rose from 22% in Q1 to 28% in Q2. Interest expense fell sligthly from US$135mn in Q1 to US$123mn in Q2. Furthermore, Bumi booked an additional US$78mn gain on sale of investments in Q2, on top of the US$94mn in Q1. The negative sequential offset were: (1) US$50mn loss in derivatives in Q2, and (2) the slight decline in associate income (Newmont) from US$53.5mn in Q1 to US$36.3mn.
In fact, Bumi reported a 43% QoQ rise in EBIT, as gross margin rose from 22% in Q1 to 28% in Q2. Interest expense fell sligthly from US$135mn in Q1 to US$123mn in Q2. Furthermore, Bumi booked an additional US$78mn gain on sale of investments in Q2, on top of the US$94mn in Q1. The negative sequential offset were: (1) US$50mn loss in derivatives in Q2, and (2) the slight decline in associate income (Newmont) from US$53.5mn in Q1 to US$36.3mn.
JPM big upward revision to come on ANTM
Aneka Tambang (ANTM) – Bottom-line: 2Q10 results well ahead of consensus, the stock could be trading closer to 12x FY10 P/E, versus consensus showing of 15x. Quarter-on-quarter pick-up was impressive: EBIT almost doubled from Rp343bn to Rp745bn, pretax profit (normalized for FX) rose 125% from Rp348bn to Rp783bn, net profit (normalized for FX) rose 136% from Rp256bn to Rp570bn. This is a BIG IF, but if ANTM can sustain 2Q10 profitability in third and fourth quarter, the company may deliver Rp2trn normalized net profit for FY10E, slightly under 10x P/E based on yesterday close. Consensus net profit stands at Rp1.37trn, JPMorgan’s forecast stands at Rp1.24trn. BUY.
Nickel price averaged at US$20,078/MT in 1Q10 and US$22,423/MT in 2Q10, while current spot is at US$20,555/MT. Gold price averaged at around US$1,110/oz in 1Q10 and US$1,195/oz in 2Q10, while current spot is at US$1242/oz. I suspect the positive surprise factors in ANTM’s 2Q10 results were: (1) Gold price, and (2) Gold production output, being masked by the decline in gold trading activities which yield much thinner profit margins.
Nickel price averaged at US$20,078/MT in 1Q10 and US$22,423/MT in 2Q10, while current spot is at US$20,555/MT. Gold price averaged at around US$1,110/oz in 1Q10 and US$1,195/oz in 2Q10, while current spot is at US$1242/oz. I suspect the positive surprise factors in ANTM’s 2Q10 results were: (1) Gold price, and (2) Gold production output, being masked by the decline in gold trading activities which yield much thinner profit margins.
Mansek BDMN:Improving, yet pressure remains
BDMN’s performance improved in 1H10, thanks to strong growth in the mass-market segment including the loan provided by Adira Finance. Even though we upgraded our forecast and TP for the counter, we maintain our neutral recommendation as rising SBI rates will give some pressure to the bank’s NIM.
Mass market segment was still dominant... BDMN reported strong loan growth of 10.6% qoq in 2Q10 to Rp70.4tn at end Jun10 (+16.0% yoy). Loans to the mass-market segment still became the largest contributor to total loans of 56.4% at end Jun10, with loans extended through Adira Finance posted the highest growth of 18.0% qoq in line with strong growth in motorcycle sales (+18.1% qoq). Adira Finance contributed 60.3% of the total loans to the mass-market segment or 34.0% of the total loans at end Jun10. Second largest contributor to the mass-market segment was loans to SEMM (Self Employed Mass Market) which accounted for 34.3% of mass market loans or 19.3% of the total loans. The bank targets loans to grow by 20% yoy to Rp72.7tn at end 2010, which will likely be achieved.
With NPL remaining sound. .. NPL from the mass-market segment remained low at 2.9% at end Jun10 compared with total NPL of 3.4%. Please bear in mind that for unsecured mass market loans, BDMN applies automatic writeoff for loans due more than 180 days.
.. yet impairment losses remained high. Despite low NPL, the bank still allocated high impairment losses, which we believed was largely derived from its strong growth in mass market loans. Additional impairment losses from collective approach was recorded at Rp671.7bn in 1H10, which was in line with the bank’s strong exposure to the mass-market segment (+17.6% ytd or equivalent to additional loans of Rp6tn).
Maintain neutral. We adjusted our forecast on the bank to incorporate 1H10 results. Even though we upgraded our forecast on the bank (thus our TP, as we are also rolling our valuation into 2011F), we are concerned with the possibility of lower NIM post an increase in SBI rates (expected to start in the 4Q10) given the bank’s funding structure which are biased toward high-cost deposits (the bank’s average cost of funds in 1H10 recorded at 5.4%, higher than the sector’s average of 4.4%). We therefore maintain our neutral ! recommend ation on the counter despite an upgrade in our TP to Rp5,500/share.
Mass market segment was still dominant... BDMN reported strong loan growth of 10.6% qoq in 2Q10 to Rp70.4tn at end Jun10 (+16.0% yoy). Loans to the mass-market segment still became the largest contributor to total loans of 56.4% at end Jun10, with loans extended through Adira Finance posted the highest growth of 18.0% qoq in line with strong growth in motorcycle sales (+18.1% qoq). Adira Finance contributed 60.3% of the total loans to the mass-market segment or 34.0% of the total loans at end Jun10. Second largest contributor to the mass-market segment was loans to SEMM (Self Employed Mass Market) which accounted for 34.3% of mass market loans or 19.3% of the total loans. The bank targets loans to grow by 20% yoy to Rp72.7tn at end 2010, which will likely be achieved.
With NPL remaining sound. .. NPL from the mass-market segment remained low at 2.9% at end Jun10 compared with total NPL of 3.4%. Please bear in mind that for unsecured mass market loans, BDMN applies automatic writeoff for loans due more than 180 days.
.. yet impairment losses remained high. Despite low NPL, the bank still allocated high impairment losses, which we believed was largely derived from its strong growth in mass market loans. Additional impairment losses from collective approach was recorded at Rp671.7bn in 1H10, which was in line with the bank’s strong exposure to the mass-market segment (+17.6% ytd or equivalent to additional loans of Rp6tn).
Maintain neutral. We adjusted our forecast on the bank to incorporate 1H10 results. Even though we upgraded our forecast on the bank (thus our TP, as we are also rolling our valuation into 2011F), we are concerned with the possibility of lower NIM post an increase in SBI rates (expected to start in the 4Q10) given the bank’s funding structure which are biased toward high-cost deposits (the bank’s average cost of funds in 1H10 recorded at 5.4%, higher than the sector’s average of 4.4%). We therefore maintain our neutral ! recommend ation on the counter despite an upgrade in our TP to Rp5,500/share.
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