Monday, October 29, 2012

Bukit Asam (PTBA-REDUCE-IDR16,100-TP:IDR13,100)

by Bahana : PTBA

29 October 2012  Bahana Beacon – Result Flash

3Q12 performance: Net earnings 25% lower than expected

§        3Q12 net profit down 7% q-q and 10% y-y: PTBA announced 3Q12 bottom line of IDR640b (25% lower than our 3Q12 estimate), down 7% q-q and 10% y-y. This brought 9M12 net income to IDR2.2t (-5.5% y-y), accounting for 67% of our full-year estimate and 66% of consensus.

§        3Q12 revenue up 6% q-q on higher sales volumes: On the top-line, PTBA posted 3Q12 coal sales of IDR2.9t (in line with our 3Q12 estimate), up 6% q-q and 11% y-y, mostly due to higher sales volumes of 4.0m tons (+14% q-q), allowing 9M12 revenue to reach IDR8.7t (+13% y-y), accounting 74% of our full-year estimate and 69% of consensus’.

§        3Q12 operating profit down 8% q-q and 11% y-y:  PTBA booked 3Q12 operating profit of IDR795b (-8% q-q, -11% y-y), 20% lower than our 3Q12 expectation, resulting in 9M12 operating profit of IDR2.7t (-7% y-y), accounting for 69% of our 2012 estimate and 64% of consensus’.

Outlook:  7%-12% earnings downgrades in 2012-14

On the back of this 3Q12 result announcement, we raise our 2012 cost assumption, resulting in 12% downgrade in 2012 earnings to bring our full-year estimate more in line (exhibit 6). We believe higher-than-expected 9M12 costs were partially due to higher third-party coal purchases of 1.1m tons, up 104% y-y from 0.6m tons in 9M11. Furthermore, we also cut our 2013-14 ASP by 2%, partially on lower local coal ASP due to possible intensifying domestic competition.  This has resulted in 7% lower earnings in 2013-14.

Recommendation & valuation: Reiterate REDUCE on 19% downside

Despite our earnings downgrades, we maintain our TP at IDR13,100 since we roll over our valuation to 2013. Based on our revised-down forecasts, PTBA trades at unattractive 2013 PE of 16x.  This coupled with poor sentiment on coal prices, PTBA is set to continue its underperformance (exhibit 4). Reduce.

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