Bukit Asam, Not giving up, CLSA

We attended an analyst briefing hosted by PTBA’s corporate secretary and investor relations team. Key takeaways are 1Q12 production is likely at the lower end of our estimates and probably disappoint consensus at c. 3mt. On the plus side, domestic prices are locked in at an average US$87/t (+3% yoy), in line with our estimate. The company is still adamant on winning back concessions issued by the Lahat regency in South Sumatra, including Adaro’s MIP concession.

Indonesian Coal, Mixed FY11, CLSA

Indonesian thermal coal producers lived up to their production promises in FY11, but reported a mixed set of results. Standouts were Adaro and ITM which reported above ours and consensus expectations on strong ASP and cost control. Oil prices present the biggest risk to earnings in 12CL having averaged US$117/t during 1Q11. We factor in increased fuel costs into our numbers. Top picks remain ITM for defensive earnings and yield and Harum for highest production growth under our coverage.

Adaro Energy (ADRO.JK), Alert: Solid 4Q11 Results; Margins Firming Up, Citi

 What stood out in the numbers — Net earnings more than tripled Y-Y in 4Q11 (+64%
Q-Q) to US$175m on higher ASP. This brings 2011 net earnings to more than double YY
to US$550m – 5% above consensus estimate and 15% above Citi’s. While the surge
in net earnings was mainly due to the low base in 4Q10 (on heavy rainfall) and one-off
item in 3Q11, the operating results were robust in 4Q11. Gross and operating margins
firmed up sequentially in 4Q11 to 39.7% and 35.1% respectively, from 35.6% and
32.4% in 3Q11, thanks to a substantially higher ASP and good cost control.

Bumi Resources, Alert: Non-Deal Roadshow Insights: Turning Shareholder Friendlier? - Citi

 Generally positive response —The majority of 28 investors we met during the NDR in
UK and Europe last week appeared to be underweight or neutral at best on Bumi
Resources. However, most of the investors warmed up to the company’s main
messages of deleveraging and production ramp up. Hence, the share price is likely to
see a substantial rebound if the company delivers on these key issues.

Sector outlook, Mining, Resource Nationalism, CLSA

Indonesia has released a Presidential Instruction restricting foreign ownership of mining concessions after 10 years of production to 49%. The rule only affects new generation mining concessions (IUPs) which are governed by the 2009 mining law. It does not affect holders of Contracts of Work which were issued up until 2000 and is not retroactive. We see limited potential impact on existing miners under our coverage including ITMG which is 65% owned by Banpu.

PT Tambang Batubara Bukit Asam Tbk, Strong FY11A earnings, Credit Suisse

● PTBA reported strong net profit growth in FY11 of 54% YoY to
Rp3,085 bn. However, this is 5% below our expectation and 8%
below consensus due to higher-than-expected in COGS and G&A
expenses.
● Sales revenue was Rp10.6 tn, up 34% YoY, on higher sales volume
and ASP, just 2% below our expectation. Coal sales volume was
13.5 mn tonnes in FY11, up 4%, in line with expectations. The
average selling price was up 33% to US$89/t in FY11.
● The company was able to grow output at a six-year CAGR of
6.3%, despite railway transportation constraints, suggesting that
the state-owned railway company, is improving capacity. The
target is to increase the existing railway capacity to 22.7 mn tpa
by 2014. The new railway is projected to start operations in 2015.
● We retain OUTPERFORM on PTBA with a target price of Rp25,000,
based on a 40% premium to the average sector P/E of 8.4x, for its
significant reserves number. We believe it will continue its volume
growth by improving the existing railway capacity.

ABM Investama Subsidiary Cipta Kridatama Secured a US$ 300 Million Mining Contract with PT Riau Baraharum

Jakarta, March 5, 2012 – PT Cipta Kridatama, a subsidiary of PT ABM Investama Tbk. (IDX: ABMM) that operates in mining contractor service just signed a new contract with PT Riau Baraharum with value of around US$ 300 million. PT Riau Baraharum is a subsidiary of PT Permata Energy Resources, which had obtained legal mining license (PKP2B) and other licenses including a forest-lending permit in Indragiri Hulu and Indragiri Hilir regency, Riau province.
 
With the contract signing, Cipta Kridatama will provide mining contract services to PT Riau Baraharum for the next five years with scope of work including land clearing, overburden removal, and heavy machinery rentals. 

ITMG, Solid delivery, CLSA

ITM’s FY11 earnings were 11% ahead of our estimates and 14% of
consensus. ITM continues to provide the highest earnings visibility of the
Indonesian coal producers, completing a hedge program to lock in 2012
earnings. We adjust 12CL earnings by -5% to reflect the hedged coal and
oil volumes. A reserve upgrade combined with benchmark coal price
strength means the stock should trade at mid-cycle multiples and we
raise our target price to Rp,49,000/sh. Stock remains our top sector pick.

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.

Delta Dunia Makmur, The Tide is Coming, Mandiri Sekuritas

For almost 2 years DOID stock has been battered badly due to a lot of
disappointment and misunderstanding on its bottom line following the
internal restructuring and reorganization process. Consensus has been
downgrading DOID earnings and target price. We foresee potential rerating
on the stock as new IPOs are looming, supported by pricing power in the
industry which mostly OB rate now happened at US$2.5/bcm or about 25%
increase on average. We reiterate our Buy rating on DOID with lower TP based
on EV/EBITDA target of 6x at Rp1,000/share vs its fair value of Rp1,250/share.

Indonesian Coal Sector Outlook, CLSA

Mean Reversion
Our Indonesian thermal coal universe is up 11% year to date as investors
have moved firmly back to risk on and have rerated cyclical equities.
Following recent share price strength, we replace PTBA with Harum as
our second choice behind defensively positioned ITM. Retain neutral
weighting as the sector remains the most exposed in Indonesia to
investor sentiment on global macro events.

Bukit Asam, One Track Mine, CLSA

We attended a site visit to South Sumatra last week visiting PTBA’s mine,
river port and rail infrastructure. PTBA is one of the lowest cost producers
in Indonesia with a highly mechanised operation and low mining strip
ratio. The stock has been an early outperformer in 2012 up 21% ytd. We
raise our target price to Rp23,500/sh following a re-rating of cyclical
equities. We retain our Outperform call but as the stock now only offers
12% upside to our fair value would prefer to buy on any weakness.
Mechanised mining