Please consider the rating criteria & important disclaimer
NH Korindo Sekuritas Indonesia
Company Report | Aug 7, 2018
Flaming Brightly amid Coal Policy
Bukit Asam Tbk | Summary (IDR bn)
1H18’s Performance Review: Buoyant Exports
PTBA enjoyed the growth of 49.4% y-y to IDR2.57 trillion in net profit,
thanks to the upbeat sales volume and exports average selling price (ASP). The exports volume surged 51.2% y-y to IDR6.2 million tons vs.
IDR4.1 million tons in the 1H17, while the exports ASP beefed up 14.2% y-y.
The uptrend of higher global coal price was the potent driver for the rosier
ASP. We project that the global coal price likely tops USD85-90/ton until
the end of 2018.
Meanwhile, the least heavy rainfall sent the production volume higher by
19.2% y-y. We project that the 2H18’s production volume likely snaps
higher by 26.9% to 14.2 million tons vs. 11.2 million tons in the 1H18.
Optimizing Low to Medium Calories
We estimate that the currently dry season is a potent driver for the escalating demand for electric supply of air conditioners; therefore, the demand for global coal escalates amid the downward electricity supply by
China-based hydro power plants. We estimate that PTBA can make use of
that momentum to increase the FY2018’s exports volume to hit 12.4 tons
soaring by 42.5% y-y.
We oversee that the strategy of optimizing exports of low-to-medium
calories coal is a logical takeaway for PTBA’s outperformance and an
anticipation of the possible amendment of DMO’s policies.
Buy
Price date as of August 6, 2018 52 wk range (Hi/Lo) 4,650/1,8102016/12A 2017/12A 2018/12E 2019/12E
Sales 14,059 19,471 23,776 24,758
Sales growth 2.4% 38.5% 22.1% 4.1% EBITDA 2,909 6,584 8,234 8,756 Net profit 2,006 4,476 5,680 6,112 EPS (IDR) 196 425 493 531
EPS growth 3.6% 117.1% 16.1% 7.6% BVPS (IDR) 916 1,198 1,394 1,557
EBITDA margin 20.7% 33.8% 34.6% 35.4%
NPM 14.3% 23.0% 23.9% 24.7%
Dividend yield 0.5% 11.8% 8.1% 8.7% Source: Company Data, Bloomberg, NHKS Research
Share Price Performance
YTD 1M 3M 12M
We recommend buy by hiking the target price of IDR5,375 (vs. the prior target of IDR3,950) in the end of 2018. We use an estimate of forward P/E of 10.2x (+0.5SD higher
than the last 5-year average of 8.3x) as the basis for valuation method. The target price
implies a 2018E P/E of 10.9x (vs. 9.3x at the current time)
Reap Benefit of Quota Transfer Scheme
The FY2018’s total domestic sales is estimated to reach 13.7 million tons or 54% from the
total production. Its estimated achievement in sales enables PTBA to comply with the domestic market obligation (DMO) requirements of supplying coal production of 25% at
the minimum to the domestic market. Assuming that 25% of PTBA’s coal production in
the amount of 6.3 million tons, we estimate that under the quota transfer scheme its overproduction of 7.3 million of coal that can be sold to other miners.
In additional, we also project that under the quota transfer scheme, the coal product can be sold at a discount of 40% of the average benchmark coal prices (HBA) of USD102/ton; thus, the prices based on the applied scheme is USD61.2/ton higher than the normal
prices of USD46/ton under DMO scheme. It obtains the additional sales of IDR1.4–IDR1.6
trillion (6%-7% of a 2018E’s total sales)
PTBA at A Glance
PT Bukit Asam (PTBA) is a state-owned coal miner whose mining concessions are situated
in Sumatera. It has 11.5 billion tons of low to mid calories coal (4,800 kcal/kg –6,700 kcal/
kg). The incorporation of a mining holding under PT Asahan Aluminium (Inalum) on November 29, 2017 was followed by the stock split with a ratio of 1:5 by PTBA on December 14th, 2017.
Coal Industry in Asia Pacific
Indonesia is the second biggest coal miner in Asia Pacific, while China positions as the first biggest coal producer in Asia Pacific. Compared to its peers in Asia Pacific, PTBA has a relatively smaller total asset yet likely similar market capitalization value. Indeed, its
return on Equity (ROE) of 43.4% is the biggest among its peers’ ROE, and gross margin of
44% recognizes its efficiency.
Asia Pasific Coal Mining Companies
Company Market Cap (USD mn) Asset Total (USD mn)
(LTM) (LTM)P/E Dividend Yield
PTBA 3,657 1,618 38.5% 43.7% 30.3% 76.5% 43.4% 9.1x 7.0%
ADRO 4,330 6,814 29.1% 35.0% 29.3% 23.8% 13.6% 9.4x 5.5%
ITMG 2,230 2,230 23.5% 29.9% 23.0% 53.8% 29.2% 8.6x 11.0%
China
SHANXI XISHAN COAL 3,170 8,892 44.7% 30.3% 13.0% 42.3% 9.6% 12.3x 0.6% SHANXI LUAN ENVIRONMENT 3,763 10,216 65.4% 35.7% 20.5% 122.0% 14.5% 8.6x 3.3% INNER MONGOLIA 3,733 12,996 61.1% 30.7% 21.9% 77.3% 18.7% 5.5x 5.5% Thailand
BANPU 3,230 8,251 22.1% 38.6% 16.7% 57.9% 6.4% 20.5x 3.1%
Phillipine
PT NH Korindo Sekuritas Indonesia —Company Research | www.nhsec.co.id Page 33
Performance Highlights
Average Selling Price (ASP) (USD/ton) |1Q16 - 1Q18E
Source: Company, NHKS research Coal Production & Sales Volume (mn ton) |1Q16 - 4Q18E
Source: Company, NHKS research
Sales Composition |1Q12 - 1Q18E
Source: Company, NHKS research PTBA Sales & Coal Price|1Q12 - 4Q18E
Source: Bloomberg, NHKS research
COGS Composition |1H18
Source: Company, NHKS research Margin Ratios|1Q12 - 4Q18E
Multiple Valuation
Forward P/E band | Last 5 years
Source: NHKS research
Dynamic Forward P/E band | Last 5 years
Source: NHKS research
Rating and target price update
Target Price Revision
Date Rating Target Price Last Price Consensus vs Last Price vs Consensus
10/25/2017 Buy 3,235 (Dec 2018) 2,360 2,912 +49.8% +11.1%
04/25/2018 Buy 3,950 (Dec.2018) 3,360 3,675 +17.6% +7.5%
08/07/2018 Buy 5,375 (Dec.2018) 4,580 4,600 +17.4% +16.8%
Source: Bloomberg, NHKS research.
Closing and Target Price
Source: NHKS research Analyst Coverage Rating
Source: Bloomberg
NH Korindo Sekuritas Indonesia (NHKS) stock ratings
1. Period: End of year target price
2. Rating system based on a stock’s absolute return from the date of publication
Buy : Greater than +15%
Hold : -15% to +15%
PT NH Korindo Sekuritas Indonesia —Company Research | www.nhsec.co.id Page 55
Summary of Financials
DISCLAIMER
This report and any electronic access hereto are restricted and intended only for the clients and related entity of PT NH Korindo Sekuritas Indonesia. This report is only for information and recipient use. It is not reproduced, copied, or made available for others. Under no circumstances is it considered as a selling offer or solicitation of securities buying. Any recommendation contained herein may not suitable for all investors. Although the information here is obtained from reliable sources, it accuracy and completeness cannot be guaranteed. PT NH Korindo Sekuritas Indonesia, its affiliated companies, respective employees, and agents disclaim any responsibility and liability for claims, proceedings, action, losses, expenses, damages, or costs filed against or suffered by any person as a result of acting pursuant to the contents hereof. Neither is PT NH Korindo Sekuritas Indonesia, its affiliated companies, employees, nor agents liable for errors, omissions, misstatements, negligence, inaccuracy arising herefrom.
