Wednesday, October 3, 2012

To acquire coal mines

What the Expert Say :

Harum Energy : HOLD; Rp5,850;
Price Target : Rp6,250; HRUM IJ

To acquire coal mines
Harum Energy (HRUM) has signed a conditional sale and purchase agreement (CSPA) with Karya Wijaya Aneka Mineral (KWAM) to acquire a 50.5% stake in Karya Usaha Pertiwi (KUP) for US$2m. KUP holds the mining license (IUP) in Kutai Kartanegara regency, East Kalimantan and is located adjacent to HRUM’s coal mines - Mahakam Sumber Jaya (MSJ) and Santan Batubara (SB) mines. This will allow KUP to share HRUM’s existing infrastructure. There are no further details of the transaction disclosed but we believe that this is a small acquisition for HRUM. Maintain Hold, Rp6,250TP as HRUM will be the most affected by the recent drop in coal prices due to smaller exposure to fixed price contracts on its coal.

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