CLSA INDO update: ITMG FY11 Result 11% ahead of CLSA on strong ASP, hedging gain

Stock: Indo Tambangraya Megah (ITMG IJ)

Market cap, T/O: US$5.4b, US$2.5m

Rec, TP: BUY, Rp46,000/sh

Event: FY11 result released, 11% ahead of 11CL, 14% ahead of consensus estimates

Our resources analyst Jayden’s comments below.

·         ITM (the 3^rd largest coal miner by market cap listed in Indonesia) released audited accounts after market close today.

·         The earnings result is 14% ahead of consensus and 11% ahead of CL estimates.

·         Production was in line with guidance at 24.7mt for the full year, however a strong 4Q11 ASP led to revenues ahead of our and consensus expectations.

·         The company is guiding for a stable q-o-q ASP into 2012 at US$97/t which is in our 12CL numbers.

·         A gain from fuel hedging of US$34m (vs a loss of US$54m in FY10) also boosted the bottom line. Stripping this out the result was 6% of our NPAT estimate.

·         ITM hedges fuel during 1Q for up to 80% of its requirements. The accounts suggest an average US$120/bbl has been locked in for an estimated 57% of the company’s fuel year requirement, ahead of our house view of US$95/bbl.

·         The company’s year end cash balance of US$612m was ahead of our expected US$575m.

·         The strong cashflow generation underwrites the company’s dividend yield of 7% in 12CL and 8% in 13CL, with 70%+ earnings paid out to shareholders.

·         The company is holding an analyst briefing next Tuesday Feb 28^th in Jakarta then a conf call with CLSA at 2pm that day for clients.

·         Expecting a strong share price performance for this stock and the sector tomorrow, with ITM being the first to report.

·         The stock currently trades on 9.8x 12CL PE and 9.2x 13CL PE in line with the sector’s 9.8x and 9.2x respectively.