by Kresna Securities
PTBA 9M11 results revealed a 68.6% YoY increase in net income, this result considered disappointing given that it only arrived at 66.3% of our FY11E. Culprit for the underperforming result is the postponement of wagon deliveries from PT KAI, causing 9M11 production to mark just 60% of our FY11E of 16.0mt. Thus, we cut our production assumption by 8.8% to 14.6mt in 2011, and 8.5%, to 16.1mt, in 2012. We set a 12 month TP of Rp23,000 on PTBA (still with a BUY), as we roll over our base year to 2012 and change our valuation methodology to pure P/E at 12.6x target.
· 3Q11 production was flat. Compared to the previous quarter, 3Q11 production only grew by 7.5% QoQ to 3.4mt, bringing the 9M11 figure to achieve only 60% of our FY11E of 16mt. It seems that we have underestimated the impact of the delay in delivery of PT KAI wagons. 3Q11 coal transportation arrived at 2.8mt, the same as the previous quarter, suggesting the YTD figure also only reached 60% of our estimate.
· Revenue slowed on a QoQ basis. In 3Q11, revenue decreased 6% QoQ, as sales volume and ASP slipped slightly, by 3.5% and 2.6% QoQ to 3.3mt and Rp794K/ton, respectively. Worth noting: despite the decrease in ASP, the YTD figure was still higher than our expectation; we assumed Rp717K/ton versus 9M11 realization of Rp786K/ton.
· Margin slipped in 3Q11. The strip ratio in 9M11 jumped to 4.2x, while 1H11 figure was still at 3.7x. This resulted in a margin correction in 3Q11; GPM fell to 48.9% from 51.5% in 2Q11.
· Cutting production assumption. We decided to cut FY11-12 production by 8.8%-8.5%, respectively to 14.6mt-16.1mt, incorporating the impact of the late wagon delivery from KAI. On the other hand, we slightly increase FY11 ASP assumption by 4.4% due higher price realization. Thus, our FY11-12 revenue projections of Rp11.4tr and Rp13.6tr are now lower by 4.7-7.4%, respectively.
· Maintain our cost assumption. 9M11 strip ratio increased quite significant to 4.2x, higher than our expectation of 4.0x. Meanwhile, railway cost realization was also higher than our expectation. Cash cost figure in 9M11 stood at around US$38.2/ton, versus US$36.7/ton of our assumption, deviating by around 4%. Hence, we increase SR assumption to 4.2x for FY11. We also increase railway tariff assumption by 6% for FY11-12. Overall, we increase FY11-12 cash cost assumption by 4.9-3.8% to US$37.3-39.0/ton, resulting 6.0%-10.6% cut on FY11-12 net income.