Bukit Asam Off to a Good Start

PTBA 1Q12 earnings were up by 15% q-o-q and 14% y-o-y, in line with both our estimates and consensus. For the quarter, sales volume registered a 7% q-o-q jump to 3.9m tonnes and coal production volume stood at 3.4m tonnes. Blended ASP was relatively flat on a q-o-q basis but was 4% higher on a y-o-y basis. We view the recent share price correction (that was triggered by uncertainties over coal mining regulation and relatively weak global coal prices) as unwarranted, given PTBA’s status as a state-owned company and its strong presence in the domestic market. Hence, we are upgrading our call to BUY with a TP of IDR21,200

Increase in volume boosts revenue
PTBA’s 1Q revenue grew by 7% q-o-q to IDR3trn, largely driven by a 7% increase in sales volume amid flat q-o-q average selling prices (ASP). Total sales volume reached 3.9m tonnes and coal production volume stood at 3.4m tonnes. Export sales volume was 13% higher q-o-q while domestic sales volume was flat. On a yearly basis, total revenue grew by 31% thanks to a 26% increase in sales volume and a 4% increase in ASP.

ASP expected to be stable for the year
For the quarter, blended ASP was flat at IDR781k/tonne. However, we believe the ASP will be stable for the remainder on the year despite recent weakness in the global price of coal, as most of PTBA’s sales go to the domestic market. In March 2012, the company announced that the contract price for Suralaya Power Plant would be set at IDR815k/tonne. Sales of coal to the Suralaya Power Plant accounted for more than 50% of PTBA’s domestic market volume.

Still in net cash position
As of March 2012, PTBA’s total cash stood at IDR6.4trn which represents 51% of its total assets.

Maintain TP but upgrade recommendation
Since PTBA’s 1Q12 performance was within our expectations, we are maintaining our target price (TP) for the counter. However, we believe the recent share price correction (that was driven by uncertainties over coal mining regulation and relatively weak global coal prices) is unwarranted, given PTBA’s status as a state-owned company and its strong presence in the domestic market. As such, we are upgrading our call to BUY with a TP of IDR21,200.