Tuesday, 24 August 2010

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Adaro Energy (ADRO) BUY (Initial Coverage)

Price: Rp2,050 Target Price: Rp2,600

A Better Choice
• Steady production growth. PT Adaro Energy (ADRO) memiliki pertumbuhan JCI Index :
3,114
produksi yang konsisten dengan pertumbuhan CAGR (2005-2009) sebesar 11% sejak
LBO. Perseroan akan meningkatkan kapasitas produksi batubara dari saat ini 45 juta Share issued (bn)

ton menjadi 80 juta ton di tahun 2014, yang merupakan key revenue driver 31,985

Pendapatan akan double di tahun 2014 dari pencapaian tahun 2009. Market Cap. (Rp bn)
• Lowest cost producer. Strategi operasi dan karakteristik batubara Adaro 66,370
memungkinkan perseroan memproduksi dengan stripping ratio yang rendah. Total 12 Mth High/Low
cash cost mencapai US$30.3/ton di FY09 dengan stripping ratio sebesar 5.0x,
2,250/1,330
INITIAL COVERAGE

terendah di industri setelah PTBA (4.0x).

Avg Daily Vol
• Legacy contracts will expire, positive earning momentum. Dengan kontribusi
89,523,482
dari tambang Wara dan re-negosiasi harga kontrak legacy yang mulai mengacu pada
Free Float (%)
benchmark international tahun 2011, kami perkirakan pendapatan dan laba bersih
41.0%
akan melonjak 24% dan 47% di FY11.
• High leverage but still manageable. Rasio DER mencapai 0.86x dan net gearing Nominal Value

sebesar 0.22x per Dec’09. Walau rasio leverage tinggi, namun kami menilai cost of Rp100

funding relatif murah, rata-rata 6.1% pa. Dengan Debt/EBITDA 1.37x dan interest Book value/share‘10
coverage 12.4x di FY10, kami menilai posisi leverage Adaro masih cukup aman. Rp658
• A better choice. Initiate with BUY, price target Rp2,600/share. Pada harga
Analyst:
Rp2,050/saham Adaro diperdagangkan pada PE’11 sebesar 10.1x, fair dibandingkan
rata-rata sektor sebesar 10.2x. Namun valuasi EV/EBITDA’10 sebesar 4.6x masih Christine Salim
terdiscount 23% dari rata-rata sektor. Dengan potensi pertumbuhan yang positif (021)8370-1608 #115
christine.salim@e-samuel.com
ditopang rencana ekspansinya dan cost efficiency, kami merekomendasikan BUY Adaro
dengan target harga Rp2,600/saham, menawarkan upside potential sebesar 26% dan
mentranslasikan EV/EBITDA’11 sebesar 5.7x. Initiate with BUY.
Forecast and Valuation (at closing price Rp2,050)
Y/E Dec (Rpbn) 09A 10E 11F 12F
Operating revenue 26,938 26,391 32,603 35,238
EBITDA 11,063 10,288 14,420 14,866
Net Profit 4,366 4,170 6,132 6,349
EPS (Rp) 137 130 192 198
EPS Growth (%) +290 -4.0 +47.0 +4.0
DPS (Rp) 24 17 39 58
Dividend Yield (%) 2.0 0.8 1.9 2.8
BV per share (Rp) 545 658 811 952
ROAA (%) 11.5 9.7 13.4 12.9
EV/EBITDA (x) 3.8 6.8 4.5 4.2
P/E Ratio (x) 8.8 15.7 10.7 10.3
P/BV Ratio (x) 2.2 3.1 2.5 2.2

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.
 Tuesday, 24 August 2010
Christine Salim
(021)8370-1608 Ext 115
christine.salim@e-samuel.com

Investment thesis

Consistent production growth.

PT Adro Energy (ADRO) merupakan produsen batubara ke-2 terbesar di Indonesia dengan
total produksi sebesar 40.6 juta ton di FY09. Adaro menguasai sekitar 18.8% pangsa pasar di
Indonesia dan sekitar 4.4% pangsa pasar global.

Perseroan memiliki pertumbuhan produksi yang konsisten dengan pertumbuhan CAGR (2005-
Consistent 2009) sebesar 11% sejak leverage buyout (LBO). Saat ini kapasitas produksi batubara telah
production mencapai 45 juta ton dan perseroan berencana untuk meningkatkan kapasitas produksi
growth with
batubara hingga mencapai 80 juta ton di tahun 2014. Peningkatan kapasitas produksi
CAGR 11%
batubara akan diupayakan melalui penambahan kapasitas produksi di tambang Tutupan
(2005-2009)
sebesar 55 juta ton dan tambang Wara sebesar 25 juta ton.

Peningkatan volume produksi batubara akan menjadi key revenue driver selain outlook harga
batubara dunia yang positif. Kami memperkirakan pendapatan ADRO di 2014 akan double
dari pencapaian tahun 2009, dengan pertumbuhan CAGR diestimasikan sebesar 10% (2010-
2014).

Figure 1. Adaro- 2nd largest coal producer in Indonesia

Production in 2009 Market Share

(mn ton)
37.44 18%
Adaro is the 57.45 26%
9.01
2nd largest 10.83
4%
5%
coal
producers in 14.34
40.59 7%
Indonesia 21.52
24.41
10% 19%
11%

Bumi Adaro Kideco ITMG Bumi Adaro Kideco ITMG

Berau PTBA Tanito Others Berau PTBA Tanito Others

Source: Company

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
2
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.
 Tuesday, 24 August 2010
Christine Salim
(021)8370-1608 Ext 115
christine.salim@e-samuel.com

Figure 2. Global top 5 thermal coal exporters (2008)

% market share

…and also 10.00%

among the 7.70%
world’s
5.40%
largest 4.80% 4.50% 4.40%
5.00%

0.00%
Xstrata KPC Anglo BHP Adaro
American Indonesia

Source: Company

Figure 3. Consistent production growth, 11% CAGR growth

Robust
production
growth is key
revenue
driver

Source: Company

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
3
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.
 Tuesday, 24 August 2010
Christine Salim
(021)8370-1608 Ext 115
christine.salim@e-samuel.com

Sizeable reserves and cleanest coal to support future growth

Adaro memiliki cadangan batubara yang berlimpah untuk men-support pertumbuhan ke
Coal reserves depan. Total cadangan batubara (reserves) mencapai 889 juta ton sementara total sumber
enough to daya batubara (resources) mencapai 3,483 juta ton. Dengan asumsi produksi batubara
support
sebesar 50 juta ton pa, maka cadangan batubara tersebut cukup untuk produksi hingga 18
production up
to 18 year tahun ke depan.

Figure 4. Coal reserves and resources

Source: Company
Jenis batubara yang dihasilkan adalah sub-bituminous yang dikenal dengan nama Envirocoal.
Envirocoal is
Sesuai dengan namanya, Envirocal memiliki kadar ash dan sulfur paling rendah diantara
lowest ash
and sulphur, batubara lainnya sehingga sangat environment friendly dan cocok digunakan untuk industri
very kelistrikan, semen dan pulp and paper.
environment Figure 5. Adaro’s product : Envirocoal
friendly
Total Ash Volatile Fixed Sulphur Nitrogen Calorific
Moisture Matter Carbon (daf Value
basis) (kcal/kg
)
Envirocal – Tutupan 25% 1-2.5% 43.5% 35.5% 0.1% 0.9% 5,900
Envirocoal – Wara 38% 2-3% 37.0% 35% 0.15% 1.0% 4,950
Newcastle coal 10% 15% 24-35% na 0.8% na 6,700
Source: Company
Figure 6. Envirocoal is environment friendly
Companies CV (kcal/kg) Ash (%) Sulphur (%)
Adaro 5,100 1.0% 0.1%
Kideco 5,000 2.5% 0.1%
ITM 5,850 3.4% 1.0%
Bumi Resources 5,700 5.2% 0.4%
Bukit Asam 5,350 6.8% 0.7%
Bayan Resources 4,900 7.5% 0.4%
Source: Company, various

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
4
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.
 Tuesday, 24 August 2010
Christine Salim
(021)8370-1608 Ext 115
christine.salim@e-samuel.com

Lower cost producer, lower stripping ratio

Adaro merupakan salah satu produsen batubara dengan biaya produksi yang terendah di
Indonesia karena strategi operasi dan karakteristik-nya sehingga memungkinkan
memproduksi dengan stripping ratio yang rendah. Total cash cost (ex royalty) mencapai
US$30.3/ton di FY09 dengan stripping ratio sebesar 5.0x, terendah di industri setelah PTBA
Cash cost (4.0x). Namun perlu ditekankan bahwa biaya transportasi Adaro tergolong mahal karena
considered
jarak tambang ke pelabuhan yang jauh, sekitar 329 km vs rata-rata industri 150km.
low due to
low strip ratio
Figure 7. Low cost producer

Source: SSI, various

Figure 8. Second lowest stripping ratio in industry

however Source: SSI, various

transportation
cost is high Figure 9. Pit to terminal distances
due to long Pit to Crusher to Terminal to Total
distances crusher terminal transshipment distance
from pit to (km) (km) point (km) (km)
terminal Kideco (Indika) 3-11 38 58 99-107
Berau 21 0 85 117
Adaro 76 0 220 329
Bumi - Arutmin Na 0 124 124
Bumi - KPC na 12 (conveyor) 2 14
Source: Company

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
5
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.
 Tuesday, 24 August 2010
Christine Salim
(021)8370-1608 Ext 115
christine.salim@e-samuel.com

Growth strategy through expansion program and cost reduction

initiative
Adaro memfokuskan diri pada core business di sektor batubara dan terus meningkatkan
Growth integrasi dan efisiensi biaya. Strategi pertumbuhan Adaro akan dicapai melalui 1)
strategy thru
pertumbuhan organik dengan peningkatan produksi batubara menjadi 80 juta ton di tahun
organic and
un-organic 2014, 2) pertumbuhan an-organik dengan mencari dan melakukan akuisisi atas sumber daya
yang berkaitan dengan batubara, jasa logistic batubara dan infrastruktur, 3) peningkatan
kualitas batubara, coal bed methane (CBM), batubara cari dan pembangkit listrik dan 4)
pengurangan biaya produksi

Beberapa pengembangan infrastruktur untuk mendukung rencana pertumbuhan dan

pengurangan biaya produksi tersebut antara lain:

Overland
conveyor will Power plants & Overland conveyor
save US$2- - Pembangunan 2x30 MW pembangkit listrik akan dibangun oleh MSW untuk
3/ton than
mendukung kebutuhan power. Pembangkit listrik ini akan menggunakan batubara
trucking
Wara.
- Saat ini pembangunan konstruksi power plant telah mencapai sekitar 28%
- Pembangunan overland conveyor sepanjang 38 km dari tambang Adaro ke Kelanis
dapat menyediakan alternatif transportasi untuk mengurangi biaya operasi
sebesar US$2-3/ton dibandingkan dengan trucking
- Total biaya investasi untuk power plant dan overland conveyor diperkirakan
US$400 juta yang akan dibiayai melalui senior notes.
- Target penyelesaian 2011-2012

Increase
Kelanis barge Ekspansi Kelanis & Alur Barito
terminal to 80 - Kapasitas di terminal sungai Kelanis akan ditingkatkan secara bertahap dari saat
mn tons ini 55 juta ton menjadi 80 juta ton untuk mendukung produksi yang terus tumbuh
- Estimasi capex sekitar US$20-30 juta yang akan dibiayai dari dana internal
- Grup Adaro melalui anak perusahaan, SDM telah menyelesaikan pengerukan alur
sungai Barito sehingga kapasitas naik 3x lipat menjadi 200 juta ton dan waktu trip
berkurang 50% menjadi 1.5 jam
- SDM mengoperasikan water way toll dan collect fees

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
6
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.
 Tuesday, 24 August 2010
Christine Salim
(021)8370-1608 Ext 115
christine.salim@e-samuel.com

Figure 10. Expansion program

Expansion
program to
double
production
capacity up
to 80mn ton
by 2014

Source: Company

Improving control and efficiency of the supply chain

Adaro tetap membeli peralatan berat baru untuk penambangan dan membangun pusat
peremukan baru dan fasilitas pembongkaran di Kelanis. Adaro akan membeli tongkang
baru dan crane apung untuk mendukung inisiatif dalam memperluas kapasitas menjadi 80
juta ton dalam jangka waktu menengah.
Figure 11. Vertically integrated from Pit to Port

Centered on
improving
control to
boost supply
chain

Source: Company

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
7
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.
 Tuesday, 24 August 2010
Christine Salim
(021)8370-1608 Ext 115
christine.salim@e-samuel.com

Financial Profile

Significant growth in performance after restructuring

Revenue grew Kinerja Adaro mengalami peningkatkan signifikan setelah restrukturisasi asset dan IPO di
by 52.4% tahun 2008. Pendapatan tumbuh sebesar CAGR 52.4% selama periode 2007-2009, ditopang
CAGR (2007- kenaikan produksi batubara dan harga jual batubara. Margin operasional meningkat signifikan
2009)
karena rendahnya biaya produksi, dengan EBITDA margin naik dari 20.9% di FY07 menjadi
followed by
margin 41.1% di FY09. Sementara laba bersih melonjak dari Rp88.5 miliar di FY07 menjadi Rp4,366
expansion miliar di FY09.

Figure 12. Operating margin comparison

Rpbn FY08 FY09 1Q10 FY10E
Indika (Rpbn) 6.0% 8.8% 6.1% 9.3%
ITMG (US$mn) 25.8% 28.8% 22.9% 26.9%
Adaro (Rpbn) 23.2% 36.8% 32.7% 34.4%
Bumi (US$mn) 32.6% 19.8% 21.5% 29.0%
Bukit Asam (Rpbn) 34.5% 39.6% 23.7% 33.2%
Source: SSI, bloomberg

Untuk tahun 2010, kenaikan volume produksi dan harga jual akan terkompensasi dengan
apresiasi Rupiah sehingga kami perkirakan pendapatan dan laba bersih cenderung stagnan
Stagnant
growth in dengan estimasi Rp26,391 miliar (-2% YoY) dan Rp4,170 miliar (-4% YoY). Proyeksi
FY10 due to pendapatan kami inline dengan konsensus, namun estimasi laba bersih lebih tinggi 5.4% dari
Rupiah konsensus. Asumsi volume produksi dan harga jual batubara kami adalah 45 juta ton dan
appreciation US$61.2/ton di FY10, sementara asumsi kurs kami sebesar Rp9,200/USD.

Figure 13. Key Assumption

FY09A FY10E FY11E FY12E
Production volume (mn ton) 40.6 45.0 51.0 58.0
Sales volume (mn ton) 41.1 45.9 51.5 58.5
Coal price (US$/ton)
- Benchmark thermal coal price 75.0 90.0 95.0 85.0
- Adaro average price 59.0 61.2 68.8 65.4
Cash costs (exc Royalty) 30.3 30.9 31.0 30.7
Source: SSI

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
8
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.
 Tuesday, 24 August 2010
Christine Salim
(021)8370-1608 Ext 115
christine.salim@e-samuel.com

Earning momentum as legacy contracts will expire in 2011

Dengan adanya kontribusi dari tambang Wara yang membuat produksi batubara meningkat
Last batch of
menjadi 51 juta ton di FY11 dan re-negosiasi harga kontrak legacy yang mulai mengacu pada
legacy
contracts benchmark international tahun 2011, maka pendapatan Adaro diperkirakan melonjak 23.5%
coming from menjadi Rp32,603 miliar dan laba bersih mencapai Rp6,133 miliar (+47% YoY) di FY11.
LBO scheme Sebagai catatan, harga kontrak legacy yang muncul karena skema leverage buy out (LBO)
will expire in akan berakhir di tahun 2010. Dengan prospek batubara yang positif, pengacuan harga
2010, positive
kontrak Adaro pada benchmark International akan berdampak positif terhadap pertumbuhan
for earning
growth pendapatan ke depan.
Figure 14. Earning sensitivity to coal price and Rupiah fluctuation
FY10E FY11E FY12E
Base case
Net profit Rp4,181 bn Rp6,125 bn Rp6,342 bn
Earnings changes
- Blended coal price -3% -3.1% -5.7% -6.1%
Earnings are - Coal production -3% -3.1% -3.2% -3.2%
sensitive with
coal and - Rupiah +Rp500/US$ -1.0% +5.4% +5.4%
Rupiah - Rupiah – Rp500/US$ +1.0% -5.4% -5.5%
fluctuation Source: SSI

2Q10 Performance in on track to meet FY10 target

Volume produksi mencapai 10.2 juta ton sehingga total produksi hingga 1H10 mencapai
21.62 juta ton (+15% YoY). Kami optimis target produksi sebesar 45 juta ton untuk FY10
dapat tercapai mengingat pencapaian 1H10 telah mewakili 48% dari target dan secara
historical, produksi akan meningkat di 3Q dan 4Q karena cuaca yang lebih bagus. Produksi
komersial awal Envirocoal-Wara telah dimulai di 1Q10 dan pada bulan Mei Adaro mengirim
pengiriman Perdana Wara ke Cina. Wara memiliki kalori value yang lebih rendah (4100 kkcal)
Recent
dari Tutupan namun memiliki strip ratio yang lebih rendah sehingga tidak terlalu terpengaruh
production on
oleh cuaca yang buruk.
track, grew
by 15% YoY Figure 15. 2Q10 performance
in 2Q10

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
9
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.
 Tuesday, 24 August 2010
Christine Salim
(021)8370-1608 Ext 115
christine.salim@e-samuel.com

Relatively high leverage, but still manageable

Total interest bearing loan Adaro mencapai Rp15,043 miliar (US$1,635 miliar) per December
2009 dengan rasio DER sebesar 0.86x dan net gearing sebesar 0.22x. Walau rasio leverage
relatif tinggi, namun kami menilai cost of funding relatif murah, rata-rata sebesar 6.1% pa.
Dengan estimasi rasio Debt/EBITDA sebesar 1.37x dan interest coverage sebesar 12.4x di
FY10, kami menilai posisi leverage Adaro masih cukup aman.

Pada Oct 2009 Adaro menerbitkan Senior Notes senilai US$800 juta tenor 10 tahun dengan
suku bunga sebesar 7.625% yang kami nilai cukup reasonable apabila kita bandingkan
dengan US$350 juta Guaranteed Secured Notes yang diterbitkan Berau Capital dengan bunga
12.5%. Senior notes tersebut mendapat rating Ba1 dari Moody dan BB+ dari Fitch.

High leverage Figure 16. Leverage comparison

but cost of 2009 Cash Debt DER Net gearing
funding (x) (%)
considered Indika (Rpbn) 2,987 4,398 0.8 0.3
low, hence ITMG (US$mn) 428 55 0.0 Net cash
still Adaro (Rpbn) 11,274 15,043 0.9 0.2
manageable
Bumi (US$mn) 153.9 3,490 2.4 2.3
Bukit Asam (Rpbn) 4,709 13 0.0 Net cash
Source: Company, SSI

Figure 17. Operating cash flow is sufficient to service principal & interest payment
Rpbn FY10 FY11 FY12 FY13 FY14
Cashflow from operation 4,735 7,583 7,971 7,089 6,998
EBITDA 10,288 14,420 14,866 13,222 12,161
Interest payment 826 722 580 474 450
Principal payment 897 1,960 2,725 768 45
Source: Company, SSI

Adaro memiliki utang sebesar total US$695 juta yang akan dibayar secara bertahap hingga
tahun 2014, yaitu US$97.5 juta di tahun 2010, US$213 juta di tahun 2011, US$296.2 di tahun
2012, US$83.5 juta di tahun 2013 dan US$5 juta di tahun 2014. Sementara Senior Notes
US$800 mn akan jatuh tempo di tahun 2019. Kami menilai Adaro tidak akan mengalami
kesulitan baik dalam melunasi principal utang maupun pembayaran bunga, dengan estimasi
kumulatif operating cash flow sebesar Rp34,353 miliar (US$3.73 miliar) di tahun 2010-2014.

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
10
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.
 Tuesday, 24 August 2010
Christine Salim
(021)8370-1608 Ext 115
christine.salim@e-samuel.com

Recent updates on IndoMet Coal Project

Pembentukan perusahaan joint venture antara Adaro Energy dan BHP Biliton telah disetujui
Joint venture Pemerintah pada Mei’10 lalu, untuk pengembangan proyek Batubara IndoMet yang baru saja
with BHP dibentuk. Adaro melalui anak perusahaan, PT Alam Tri Abadi telah mengakuisisi 25% saham
Biliton to di perusahaan joint venture senilai US$335 juta dan sisanya 75% dimiliki oleh BHP Biliton.
develop
IndoMet coal IndoMet terdiri dari 7 kontrak karya batubara (CCoWs) di Kalimantan Timur dan Tengah
dengan sumberdaya batubara diperkirakan mencapai 774 juta ton. Dengan asumsi EV/ton
sebesar US$4/ton, kami memperkirakan EV IndoMet sebesar US$3.1 milyar.
Kami menilai positif proyek IndoMet terhadap future earning Adaro. Dalam hal pendanaan
investasi, kami menilai Adaro tidak akan mengalami kesulitan baik dana internal maupun
eksternal. dengan estimasi operating cashflow sekitar Rp7tr per tahun

Valuation and recommendation

Initiate coverage with BUY, price target Rp2,600/share.

Pada harga Rp2,100/saham Adaro diperdagangkan pada PE’11 sebesar 10.1x, fair
dibandingkan dengan rata-rata sektor sebesar 10.2x. Namun valuasi EV/EBITDA’10 sebesar
4.6x masih terdiscount 23% dari rata-rata sektor sebesar 6.0x. Dengan potensi pertumbuhan
yang positif ditopang rencana ekspansinya, kami merekomendasikan BUY untuk Adaro
Initiate with
dengan target harga sebesar Rp2,600/saham. Target harga kami menawarkan upside
BUY, TP
Rp2,600/shr, potential sebesar 26% dan mentranslasikan PE’11 sebesar 13.6x dan EV/EBITDA’11 sebesar
we believe 5.7x. Dalam menentukan target harga, kami menggunakan metode DCF dengan WACC
Adaro is 11.93% dan terminal growth 5%.
better choice
in coal sector
Leverage level Adaro tergolong tinggi dimana net gearing mencapai 0.22x dibandingkan
with its
robust growth dengan PTBA dan ITMG yang net cash position. Namun leverage level Adaro masih lebih
outlook rendah dibandingkan dengan INDY yang memiliki net gearing sebesar 0.3x dan BUMI
sebesar 2.3x. Kami menilai Adaro sebagai salah satu alternatif investasi di sektor
batubara. Initiate with BUY recommendation.

Risiko terhadap valuasi kami: 1) memburuknya perekonomian global yang

berpengaruh terhadap permintaan dan harga batubara dunia, 2) fluktuasi harga minyak
dunia, 3) perubahan regulasi baik domestic maupun global dan 4) cuaca yang jelek yang
akan mempengaruhi produksi batubara

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
11
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.
 Tuesday, 24 August 2010
Christine Salim
(021)8370-1608 Ext 115
christine.salim@e-samuel.com

Figure 18. DCF Valuation

Fair Value Using DCF = Rp3,625/share
PV of Cash Flow (Rpbn) 87,242
Net Debt FY10 (Rpbn) 3,514
Equity Value (Rpbn) 83,728
Issued Shares (mn) 31,985
DCF Equity Value/share (Rp) 2,617
Terminal growth 5.0%
WACC 11.93%
Source: SSI

Figure 19. Coal Comparison - Indonesia coal

Company Last Price Market Cap PER EV/EBITDA EV/Reserve
(US$mn) 09 10 11 09 10 11 (US$/ton)

BUMI 1,640 3,525 18.6 10.6 7.3 3.6 4.7 3.7 2.4

PTBA 16,350 4,186 13.8 13.6 10.2 8.6 8.4 6.7 1.8

ITMG 40,300 5,059 15.5 16.6 10.2 9.9 9.6 6.7 16.5

ADARO 2,050 7,285 15.0 15.8 10.1 6.4 6.6 4.6 8.7

Average Indonesia 15.7 14.1 9.5 7.1 7.3 5.4 7.3

Coal Comparison - Regional coal

Company Last Price Market Cap PER EV/EBITDA
(US$mn) 10 11 10 11

Yanzhou 1171 HK 16.8 13,934 9.9 8.5 7.5 6.7

China Coal 1898 HK 11.3 22,101 12.8 10.9 6.8 5.7

China Shenhua Energy 1088 HK 29.7 83,797 13.7 12.2 7.7 6.8

China Average 12.1 10.5 7.3 6.4

Coal & Allied CNA AU 86.6 10,183 12.8 9.3 8.5 5.8

Macarthur Coal MCC AU 12.44 3,765 25.9 10.9 13.8 6.7

Centennial Coal CEY AU 6.0 2,836 15.8 11.8 7.5 6.2

Australia Average 18.2 10.7 9.9 6.2

Average Regional 15.2 10.6 8.6 6.3

Source: SSI, bloomberg

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
12
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.
 Tuesday, 24 August 2010
Christine Salim
(021)8370-1608 Ext 115
christine.salim@e-samuel.com

Company Profile
Adaro Energy adalah holding company dari Adaro Indonesia, yang memulai kegiatan
penambangan tahun 1992 di area sumber daya batubara di kabupaten Tanjung,
Kalimantan Selatan. Adaro beroperasi berdasarkan PKP2B generasi pertama yang berlaku
hingga tahun 2022 dan dapat diperpanjang dengan kesepakatan bersama.

Perseroan merupakan penghasil batubara thermal terbesar ke-2 di Indonesia. Perseroan

menjalankan penambangan batubara tunggal terbesar di Indonesia dan salah satu
pemasok utama dunia untuk pasar batubara thermal yang pegantarannya melalui laut
dengan kapasitas saat ini mencapai 50 juta ton per tahun. Perseroan memiliki sekitar 3.5
miliar ton cadangan dan sumber daya batubara dan terintegrasi dari eksplorasi hingga
pemasaran.

Figure 20. Adaro’s corporate milestone

Source: company

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
13
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.
 Tuesday, 24 August 2010
Christine Salim
(021)8370-1608 Ext 115
christine.salim@e-samuel.com

Figure 21. Company’s structure

Source: company

Figure 22. Management team

Board of Commisioner Board of Director
Edwin Soeryadjaja – Presiden Komisaris Garibaldi Thohir – Presiden Direktur
TP Rachmat – Wakil Presiden Komisaris Christian Ariano Rachmat – Wakil Presiden
Direktur
Ir Subianto – Komisaris Sandiaga Salahuddin Uno – Direktur
Lim Soon Huat – Komisaris Andre J Mamuaya – Direktur Corporate
Affair dan Sekretaris Perusahaan
Ir Palgunadi Tatit Setyawan – Komisaris David Tendian – Direktur Keuangan
Independen
DR Ir Raden Pardede – Komisaris Chia Ah Hoo – Direktur Operasi
Independen
Source: company

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
14
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.
 Tuesday, 24 August 2010
Christine Salim
(021)8370-1608 Ext 115
christine.salim@e-samuel.com

Industry Outlook
High demand from China and India
Harga batubara berdasarkan indeks newcastle saat ini berada pada level US$91.87/ton atau
naik 17.5% YTD’10. Level tertinggi tahun ini adalah US$100.77/ton. Ditopang pemulihan
ekonomi global, kami perkirakan permintaan batubara akan terus meningkat. China dan
India merupakan konsumen batubara terbesar di dunia, mewakili 49.6% dari total konsumsi
batubara global. Berdasarkan proyeksi IMF, pertumbuhan ekonomi China diperkirakan masih
tumbuh 10% di FY10 dan 9.9% di FY11 dan India diperkirakan tumbuh 8.8% di FY10 dan
8.4% di FY11 sehingga permintaan batubara dari kedua negara tersebut diperkirakan masih
relatif tinggi.

World coal consumption to grow at average annual rate of 1.6%

Konsumsi batubara dunia diperkirakan meningkat dari 132 quadrillion btu di tahun 2007
menjadi 206 quadrillion btu di 2035 atau dengan rata-rata pertumbuhan sebesar 1.6% p.a.
Konsumsi terbesar adalah negara non-OECD Asia yang mewakili 95% dari total konsumsi
dunia. Meningkatnya permintaan energi untuk pembangkit listrik dan industri di negara non-
OECD Asia diperkirakan paling besar dari batubara, antara lain instalasi PLTU di China yang
akan tumbuh lebih dari 2x lipat dari tahun 2007 ke tahun 2035 dan konsumsi batubara untuk
sektor industri China yang diperkirakan tumbuh sekitar 55%.
Figure 23. World coal consumption by Figure 24. World net electricity
region, 1990-2035 (quadrillion Btu) generation by fuel, 2007-2035 (tr
kwh)

Source: US Energy Information Administration

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
15
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.
 Tuesday, 24 August 2010
Christine Salim
(021)8370-1608 Ext 115
christine.salim@e-samuel.com

World net electricity generation is projected to grow by 87% during 2007-2020

Berdasarkan referensi dari US Energy Information Administration, penggunaan listrik dunia
diperkirakan naik 87% dari 18.8 tr kwh di tahun 2007 menjadi 25 tr kwh di tahun 2020 dan
35.2 tr kwh di tahun 2035. Resesi ekonomi menyebabkan permintaan listrik dunia melambat
di tahun 2008-2009, namun diperkirakan kembali ke level pre-crisis pada tahun 2015.
Permintaan dan konsumsi listrik di negara OECD akan tumbuh lebih rendah dibandingkan
negara non-OECD, dengan pertumbuhan sebesar 1.1% pa vs 3.3% pa.

Coal is the fastest growing source for electricity generation

Penggunaan listrik yang terus bertumbuh akan terus meningkatkan permintaan batubara
yang merupakan alternatif bahan bakar lebih murah. Pembangkit listrik tenaga uap yang
menggunakan batubara sebagai bahan bakar diperkirakan tumbuh rata-rata 2.3%. Selain itu,
proyek pembangunan PLTU di Asia dengan total sebesar 579 gigawatt dalam 20 tahun ke
depan diperkirakan membutuhkan tambahan batubara sebanyak 1.7 miliar ton per tahun.
PLTU di China diperkirakan membutuhkan batubara sebesar 1.8 milyar ton di tahun 2015
dari 1.3 milyar ton di tahun 2008, atau diperkirakan tumbuh sekitar 9% pa.

Dari sisi supplai, masalah infrastruktur di Australia dan Afrika Selatan dan kondisi cuaca
yang menjadi salah satu hambatan untuk kegiatan penambangan batubara akan
mempengaruhi supplai batubara global.

Figure 25. World net electricity Figure 26. World renewable

generation by guel 2007-2035 (tr electricity generation by energy
kwh) source, exl wind and hydropower
2007-2035 (bn kwh)

Source: US Energy Information Administration

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
16
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.
 Tuesday, 24 August 2010
Christine Salim
(021)8370-1608 Ext 115
christine.salim@e-samuel.com

ADRO
Mining & Resources

Profit and Loss Statement

Company Background
Yr-end Dec (Rpbn) 09A 10E 11F 12F
Adaro Energy is the holding company of Adaro
Revenue 26,938 26,391 32,603 35,238
Indonesia, which is Indonesia’s second largest
Cost of good sold 15,900 16,286 18,307 20,532 coal producer and is amongst the lowest cost
Gross profit 11,038 10,105 14,296 14,706
coal producers. The coal characteristics are
Operating expenses 1,109 1,029 1,272 1,374
sub-bituminous, with total resources of 3.5 bn
tones.
Operating profit 9,928 9,076 13,024 13,332
Adaro is vertically integrated with business
EBITDA 11,063 10,288 14,420 14,866
includes coal trading, contract mining services,
Other (exp)/inc (1,350) (1,094) (1,286) (1,179)
barge and shiploading services, power
Pretax profit 8,578 7,981 11,738 12,153
generation and coal infrastructure and
logistics.
Tax 4,119 3,591 5,282 5,468
Minority Interest 50 219 323 334 Shareholding Structure
Net profit 4,366 4,170 6,133 6,349 PT Adaro Strategi : 43.91%
Thohir Garibaldi : 6.46%
Balance Sheet Soeryadjdya Edwin : 4.30%
Yr-end Dec (Rpbn) 09A 10E 11F 12F Rachmat Theodore : 2.26%
Cash 11,274 10,203 11,628 13,061 Uno Sandiaga : 2.07%
Current Assets 15,835 15,152 17,499 19,451 Public : 41.00%
Fixed Assets (Net) 17,207 19,675 21,959 23,185
Other LT Assets 9,422 8,930 8,320 7,661 Price Chart
Total Assets 42,464 43,757 47,778 50,297

Current Liablilites 6,140 7,595 7,120 7,795

410
Bank Loan 14,856 10,945 10,435 7,642
LT Liablilites 3,957 4,076 4,199 4,324 340

Total Liabilities 24,953 22,616 21,754 19,761 270

Total Equity 17,444 21,071 25,953 30,462 ADRO
200 JCI

Basic Assumption 130

Yr-end Dec (Rpbn) 09A 10E 11F 12F 60
Coal Production (mn ton) 40.6 45.0 51.0 58.0
09

10
9

0
9

0
9
l-0

l-1
r- 0

r- 1
-0

Avg coal price (US$) 75.0 90.0 95.0 85.0

n-

n-
ct
Ju

Ju
Ap

Ap
Ja

Ja
O

Avg selling price (US$) 59.0 61.2 68.8 65.4

Cash Cost (US$/MT) 30.3 30.9 31.0 30.7
Effective Tax Rate 48% 45% 45% 45%

This document is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Under no
circumstances is it to be considered as an offer to sell or solicitation to buy any security. Any recommendation contained in this report may not be suitable for
17
all investors. Moreover, although the information contained herein has been obtained from sources believed to be reliable, its accuracy, completeness and
reliability cannot be guaranteed. All rights reserved by PT Samuel Sekuritas Indonesia.