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Thursday, March 24, 2011

PT. Tambang Batubara Bukit Asam Tbk (PTBA)

by CIMB Securities

• In line; upgrade to Outperform from Neutral. 2010 core and operating profits of Rp1.99tr (-27% yoy) and Rp2.3tr (-35% yoy) respectively matched our forecasts, accounting for 97% and 100% of our numbers. While FY10 numbers were slightly below consensus estimates, a positive feature of 4Q10 was an improved cost structure. This and the positive settlement of 2011 domestic prices are behind our 8-10% EPS upgrades for FY11-12 and DCF-based target price to Rp27,300 (from Rp25,900, WACC 12.4%). We also introduce FY13 forecasts. Following our upgrade and its recent share-price retreat, we raise PTBA to Outperform, anticipating stock catalysts from additional capacity.


• Strong operating performance, helped by cost efficiencies. 4Q10 core and operating profits were up 18% and 14% qoq respectively, on the back of lower operating costs, a continuation of the trend in previous quarters. The company had shifted more production in-house. 2010 operating performance was in line with our expectation, with sales volume of 12.95Mt (+4% yoy) and ASPs of Rp612,366/tonne (-18% yoy).

• Positive 2011 domestic price settlement. Selling prices to the Suralaya power plant (38% of sales) have been settled at Rp815,000/ tonne (US$91.50). While this is slightly below our expectation, the settlement implies a fair “market” price of US$105-110/tonne. Additionally, slightly lower prices to Suralaya have been compensated by better-than-expected contract prices locked in with its other powerplant customers, namely Tanjung Enim (Rp575,000/tonne, +34% yoy) and Tarahan (Rp729,325/tonne, +28% yoy).

• 2011 volume projection (+20% yoy) intact. The company has reaffirmed railway capacity of 13.6Mt from the state-owned railway operator, PT KAI. However, the delivery of additional locomotives is still expected by mid-2011, a delay from 1Q11. But as our FY11 sales-volume forecast of 15.6Mt (+20% yoy) has factored in the possibility of delays, our target should still be attainable.

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