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Sunday, March 6, 2011

PT. Aneka Tambang Tbk (ANTM)

by Credit Suisse Securities Indonesia

4Q10 and full-year unaudited results: ANTM’s net profit increased 257% QoQ and 122% YoY, ~10% above consensus but ~11% below our estimates. Its revenue ex. gold trading rose 45% QoQ and 51% YoY, approximately 4% above our 2010 estimate. ANTM’s gross profit was 7% above our expectation, but higher opex and lower dividends from Newcrest put its net profit below our initial forecast.

ANTM’s significant increase in earnings was primarily driven by strong nickel and gold prices in 2010, as well as additional gold production from Cibaliung. We revise our 2010 earnings estimate to reflect the unaudited results. We also revise our 2011-12 earnings estimates to reflect latest nickel price forecasts and higher fuel prices.


Strong nickel and gold prices have primarily been driven by growth in global industrial production (indicated by Global IP). Despite positive outlook, we remain cautious given the oversupply concerns about nickel. However, ANTM should benefit from its product mix from gold, which would provide further earnings hedge.

We maintain our NEUTRAL rating and target price of Rp2,600.

Slightly higher revenue, but higher operating expenses
ANTM’s net profit increased 257% QoQ and 122% YoY, ~10% above consensus but ~11% below our forecasts. Its revenue ex. gold trading rose 45% QoQ and 51% YoY, about 4% above our 2010 estimate. ANTM’s gross profit was 7% above our estimate. The higher profit was primarily attributed to higher nickel ore sales (as reported at the end of January), approximately 14% higher than our initial forecast. COGS was slightly above (by 4%) our initial forecast. Operating expenses increased 53% YoY, with almost all items increasing by more than 20%. We observed the most significant increase in CSR’s expenses (237% YoY) and exploration expenses (100% YoY). Historically, ANTM’s opex has ranged between 7% and 13% of sales. In 2010, ANTM reported Rp268 bn in dividends from its 10% interest in Newcrest Gosowong mine.

Revised earnings estimates for 2010-12 reflect latest results, latest nickel forecasts and higher fuel prices
We revise our 2010 earnings estimate to reflect the unaudited results. We also revise our 2011-12 earnings estimates to reflect latest nickel price forecasts and higher fuel prices.

Positive industrial production growth has fueled prices, but remain cautious on nickel while slightly more positive on gold
ANTM’s significant increase in revenue was primarily driven by strong nickel and gold prices in 2010, due to positive growth in global industrial production (as indicated by global IP). Despite positive outlook on this, we remain cautious given the oversupply concerns about nickel. However, ANTM should benefit from its product mix from gold, which would provide further earnings hedge.

We maintain our NEUTRAL and target price of Rp2,600. We maintain our target price based on a five-year average historical EV/EBITDA of 7.0x.

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