Riset Harum Energy Oleh Ciptadana Sekuritas

PT.
Harum Energy Tbk (HRUM) SECURITIES

BUY RESEARCH REPORT
12-Month Price Target : Rp 9,300/shr Equity Mining
HRUM vs JCI The growth champion

3800 7500
JCI HRUM Initiating coverage with BUY recommendation and target price
7000 of Rp9,300/share
3700 We initiate our coverage of Harum Energy (HRUM) with a BUY rec-
6500
ommendation and target price of Rp9,300/share. Our target price of
6000 HRUM implies 15% WACC and 1% terminal growth. Strong produc-
3600
tion growth and a very good prospect of average selling price (ASP)
5500
consistent increase are two main reasons why we think that the com-
3500 5000 pany deserves much higher valuation than the current price of
Rp6,850/share.
4- v-10
8- v-10
-N 10
-O 0
-O 0
-O 0
-O 0
-O 0
-O 0
-O 0
2- t-10
7- t-10
-O 0
-N 10
-N 0
0
13 ct-1
15 ct-1
19 ct-1
21 ct-1
25 ct-1
27 ct-1
29 ct-1
11 ct-1
16 ov-1
-1
10 ov-
12 ov-
ov
c
Oc
No
No
O
N
5-
A very strong growth of well priced coal

Source : Bloomberg
If one would like to obtain the best of both worlds in terms of strong
production growth and well priced coal in the Indonesian coal pro-
ducers universe, HRUM is one and only choice. The company was
able to increase its coal production consistently from 2.8Mt in 2007
Current price (11/16/2010) : 6,850
52 Wk high (10/12/2010) : 7500
to 5.8Mt in 2009 and on track to achieve 7.4Mt of coal production in
52 Wk low (10/05/2010) : 5,200 2010. HRUM’s coal price is the highest priced coal among listed In-
Shares outstanding (mn) : 2,700.0 donesian coal producers after Indo Tambangraya Megah (ITMG) with
Market cap (Rpbn) : 18,495 US$72.4/tonne of average selling price (ASP) in 2009, slightly lower
Bloomberg code : HRUM IJ than ITMG’s US$73.8/tonne of ASP in 2009. HRUM’s management
Source : Bloomberg projected that the cumulative average growth rate of production will
be 39% from 2007 to 2012 and it is a conservative estimate in our
view.
Selected Financial Ratios 9M10 results and beyond

HRUM mines produced 5.2 million tonnes of coal in the first nine
Ratios 2008 2009 2010E 2011E 2012E
months of 2010 (9M10) and it is a 28% increase from 9M09 where
Current ratio 0.49 0.82 2.08 2.32 2.76 the company mines produced 4.1 million tonnes of coal. The net in-
come in 9M10 was Rp569 billion, more than four-fold increase from
Gross profit
0.26 0.36 0.49 0.52 0.54
margin the 3M10 where the bottom line stood at Rp134 billion. Year on year
Operating profit basis, HRUM’s net income of 9M10 only grew 0.2% from Rp568 bil-
0.12 0.27 0.35 0.42 0.45
margin
lion in 9M90, mainly because extreme spike of rupiah against US
Net profit margin 0.05 0.17 0.21 0.26 0.29 dollar within the period, where in US dollar the net income grew 17%.
As rupiah is stabilizing and the company will book better ASP in the
Debt to equity 3.39 0.84 0.22 0.11 0.06
near future we estimate that HRUM will realized 15% growth of net
Liabilities to
44.88 11.50 5.87 5.80 5.49 income in FY10 and 104% growth of net income in FY11.
Equity
Source : Company & Ciptadana Estimates

Strong balance sheet enables aggressive mode
Thanks to strong growth of coal production and very little debt HRUM
is sitting on cash. Even before the fresh capital from the IPO, the
company’s debt to equity ratio in 3Q10 is a healthy 1.5x. We esti-
mate that the company will be in a net cash position of Rp1.2 trillion
and has debt to equity of 0.2x in FY10 . The very strong balance
Syaiful Adrian sheet enables the company to conduct aggressive expansion in the
Phone : (62-21) 255 74 919 future without a need to absorb substantial debt addition.
Email : adriansyaiful@ciptadana.com
PT. CIPTADANA SECURITIES , expressly disclaim any and all liability for representations or warranties expressed or implied, contained herein or omissions therefrom or for any loss howsoever arising from any use of
this document or its contents or otherwise arising in connection therewith. Opinions expressed in this report are our present views and are subject to change without notice.
SECURITIES
Company Overview
The Milestones
Fig1. Harum Energy Milestones
1987: 1995: HE 2002: 2009: MSJ production

Awarded Gen established Acquired Acquisition commenced in Block E
I CCOW under the 50% interest of fourth LLJ fleet to expand by 10
1989-90: First name PT in SB from floating sets of tugboats and
to load Asia Antrasit Wesfarmers crane by barges
LCM
handymax Expansion of infrastructure
and panamax 1996: TBH 2004: Started at Separi port
vessels at established floating
Samarinda cranes JV
TBH expected to
commence operations in
1998: SB 2H 2011
established
1975-1980 1980-1985 1985-1990 1990 - 2000 2000-2005 2005-2009 2010 Onwards
1976: Mr. Kiki 1983: 2000: MSJ

rd
2008: Interest in SB
Barki invested Acquired PT signed 3 transferred to HE
in first coal mine Tanito Harum generation 2008: Infrastructure
CCOW expanded at MSJ
1980: First 1984: Coal 2008: MSJ Block D started
private sector processing 2004: MSJ production
coal producer plant at Loa commenced
and exporter Tebu began production at
2009: SB started
production
from Indonesia operations Block A
2009: Acquisition of LLJ
2009: Acquisition of 7.6%
stake in Cockatoo Coal,
subsequently diluted to
6.9%
Source : Company
PT Harum Energy Tbk (HRUM) November 18, 2010

SECURITIES
The Group Overview Fig2. Harum Energy Group
PT Harum Energy
("HE")
80.0% 50.0% 99.9% 99.1% 100.0%
PT Mahakam Sumber PT Santan Batubara PT Tambang Batubara PT Layar Lintas Jaya Harum Energy
Jaya ("MSJ")1 ("SB")2 Harum ("TBH")3 ("LLJ")4 Australia
35.0% 6.9%
PT Lotus Coalindo
Marine Cockatoo Coal
("LCM")
Resources and
Asset type Contractual Framework Location Key Statistics
Reserves5
MSJ Thermal coal mine Third generation CCoW East Kalimantan JORC resources : 339 Mt Commenced operations in
2004
Reserves : 95 Mt 2009 Production : 4.5 Mt
Expiration in 2034 2009 Sales : 5.8 Mt
SB Thermal coal mine Third generation CCoW East Kalimantan JORC resources : 109 Mt Transferred to HE in
January 2008
Potential non JORC Commenced operations in
resources: 573 Mt 1Q2009
Expiration in 2038 Reserves: 16 Mt 2009 Production : 1.3 Mt
2009 Sales : 1.0 Mt
TBH Thermal coal mine IUP East Kalimantan JORC Resources : 39 Mt Commence operations in
2H2011
Expiration in 2011 Reserves : 12 Mt
Barging services and SIUPAL, domestic Headquartered in Transferred to HE in

LLJ
transshipment shipping license Jakarta with operations November 2009
in Samarinda
Operating fleet of 23 sets
of tugboats and barges 6
4 floating cranes through a
35% interest in LCM
10 sets of tugboats and
barges were ordered in
February 2010
Thermal and
HE Australia metallurgical coal mine Bowen and Surat JORC Resources : 614 Mt Acquired 7.6% of share
through investment in Basins (Australia) capital in November 2009
Cockatoo Coal Limited
One Harum representative
on BOD of Cockatoo Coal
2009 Production : 0.5 Mt

Source : Company
1. 20% of MSJ share capital is held by a local government entity in the form of Series B shares (preferred
dividend of fixed US$0.8/tonne)
2. PT Petrosea Tbk as JV partner has 50% ownership
3. Barki family has 0.03% ownership via PT Sinar Indobatu Perdana
4. Barki family has 0.9% ownership
5. As of December 31, 2009
6. LLJ owns 17 tugboats and 23 barges (rents tugboats externally)

SECURITIES
Fig3. Harum Energy Management Team
Relevant
Name Position Industry experience experience
(years)
Member of founding family -

Lawrence Barki President Commissioner 13
Tanito Group
Member of BOD, Indonesian
Chamber of Commerce and In-
dustry - USA Committee
General Manager of Mining at PT

Budi Rahardjo Commissioner 30+
United Tractors (2000-2004)
Strong management team with over
150 years combined experience Yun Mulyana Commissioner Commissioner of MSJ since 2002 8
Indonesia Deputy Chief of Police

(2001-2002)
Basrief Arief, S.H. Commissioner Commissioner of MSJ since 2008 2
Deputy Attorney General

(2005-2007)
Independent Arthur Young International

Agus Rajani Panjaitan 20+
Commissioner (now Ernst & Young) (1984-1990)
7 years with Deutsche Bank and

Ray A. Gunara President Director Credit Suisse as an investment 17
banker
Previously Regional Marketing
David Heap Director 30+
Manager of Anglo Coal Plc
Previously with PT Adaro Indone-
Scott Thompson Director sia and Anglo American in South 18
Africa
Previously General Manager at
Eddy Sumarsono Director 30+
PT Berau Coal
Source : Company
Management team strength :
• More than 150 years combined experience
• Emphasizing on strong financial discipline and solid risk management
• Stable relationship with government and regulatory authorities
• Commitment to good governance, prudent financial management and corporate

social responsibility

SECURITIES
Harum Energy Mines
Fig4. Harum Energy sites location
Tambang Batubara
Harum (TBH)
35km west of
Sangatta
East Kalimantan
PT Kaltim Prima Coal

(BUMI)
Santan Batubara (SB)

PT Indominco (ITMG)
55km north of Samarinda
Sangatta
Jembayan (Straits Asia)
Mahakam Sumber
PT Bayan Jaya (MSJ)
Mines Separi 25km north of Sama-
Port rinda
Samarinda
Source : Company
All 3 mines that belong to Harum Energy are within a 70 km radius. The close prox-
imity between mines allows Harum Energy to service all of its operations through
an integrated coal supply chain. As the distance between MSJ and SB is very
close, the two mines share infrastructure such as coal processing facilities, dedi-
cated haul roads, port and barge loading facilities.
TBH which has relatively low sulphur coal also shares transshipment facilities with
MSJ and SB. The ideal location and proximity between Harum Energy’s mines en-
sures the company to have an efficient cost structure and improves the utilization.

SECURITIES
Geological Map
Fig5. Harum Energy geological map
TBH
Balikpapan
Formation
SB
MSJ
Source : Company
MSJ, TBH and SB are from the Balikpapan Formation, located within the wider
Kutai Basin as seen in the geological map. The seams were formed in the mid-
dle to upper Miocene age and the main coal bearing unit formed with peat
swamps in a delta plain environment.

SECURITIES
Mahakam Sumber Jaya (MSJ)
Fig6. MSJ location
Pit to Port dist. 40km
Source : Company
MSJ facts
Concession area (ha) 20,380

1
JORC resources (Mt) 339.4
2
Reserves (Mt) 95.3
Processing capacity (MtPA) 10
CV (adb Kcal/kg) 5,800-6,400
Source : Company
MSJ has 20,380 ha of concession with 95.3 Mt of reserves and 339.4 Mt of JORC
reserves as of December 31, 2009. It is the largest Harum Energy mine in terms of
reserves. The MSJ exploration was completed in 2002. Mine construction com-
menced in 2003 and coal production started in 2004. Over 5000 holes have been
drilled and to date around 18 million tones of coal have been mined.
1. JORC resources as of December 31, 2009

2. Reserves as of December 31, 2009

SECURITIES
Santan Batubara (SB)
Fig7. SB location

Source : Company
SB facts as of December

Reserves (Mt) 16.0
Processing capacity (MtPA) 5
CV (adb Kcal/kg) 5,400-6,400
Source : Company
SB has the largest concession area compares to other Harum Energy mines with
total of 24,930 ha of concession area. JORC resources and reserves as of the end of
2009 are 108.6Mt and 16 Mt, respectively.
The SB exploration was completed in 2004 and the coal production was started in
April 2009. The infill drilling program is still in progress and to date over 2,300 drill
holes have been drill.
1. JORC resources as of December 31, 2009

2. Reserves as of December 31, 2009

SECURITIES
Tambang Batubara Harum (TBH)
Fig 8. TBH location
Source : Company
TBH facts

Reserves (Mt) 11.5
CV (adb Kcal/kg) 5,400-5,800
Source : Company
Both of Block A and Block B of TBH sit on the KPC (Bumi Resources) boundary and
adjacent to producing mines. The total concession area of TBH is 1,886 Ha with 39.2
MT JORC resources and 11.5 Mt reserves.
Both blocks of TBH have been mapped and drilled. In Block A, over 300 holes have
been drilled. The exploration and infill drilling in Block A was completed in 2007.

SECURITIES
A very strong growth of well priced coal
If one would like to obtain the best of both worlds in terms of strong production
growth and well priced coal in the Indonesian coal producers universe, HRUM is
one and only choice. The company was able to increase its coal production consis-
tently from 2.8Mt in 2007 to 5.8Mt in 2009 and on track to achieve 7.4Mt of coal
production in 2010.
Fig9. HRUM mines coal production (including 50% of Petrosea interest in SB)
Production (MT)
16
14.5
12
10.5
8 7.4
5.8
4 2.8 3
0
2007 2008 2009 2010E 2011E 2012E
Source : Company
HRUM’s coal price is the highest priced coal among listed Indonesian coal produc-
Second highest priced coal ers after Indo Tambangraya Megah (ITMG) with US$72.4/tonne of average selling
with substantial production price (ASP) in 2009, slightly lower than ITMG’s US$73.8/tonne of ASP in 2009. The
growth high ASP is contributed to relatively high quality of HRUM’s coal where coal from
Mahakam Sumber Jaya (MSJ) mine has caloric value range of 5,800 to 6,400 adb
Kcal/kg and Santan Batubara (SB) mine has caloric value range of 5,400 to 6,400
adb Kcal/kg.
Fig10. Indonesia coal producers average selling price in FY09

US$/tonne
75 73.8
72.4
71
70
65
59.7 59.3
60
55
52.7
50
ITMG HRUM PTBA BUMI ADRO INDY
Source : Company
10

SECURITIES
HRUM’s management projected that the cumulative average growth rate of produc-
tion will be 39% from 2007 to 2012 and it is a conservative estimate in our view.
HRUM started 2011 sales contract discussion in October 2010. We are confident
Expecting consistent increase in
that HRUM’s ASP in 2011 will be better than in 2010. Our estimate of Harum’s ASP
ASP due to inflation and strong
demand in 2011 and 2012 is US$83.2/tonne and US$91.5/tonne, respectively
Fig11. HRUM historical average selling price
US$/tonne
90
75 72.4 73.2
65.1
60
45
36.1
30
2007 2008 2009 9M10
Source : Company
9M10 results and beyond
HRUM mines produced 5.2 million tones of coal in the first nine months of 2010
(9M10) and it is a 28% increase from 9M09 where the mines produced 4.1 million
Coal sales increased 29% in
tones of coal. The blended ASP reached US$72.7/tonne in 9M10, an increased
9M10 from a year earlier
from US$71.5/tonne in 9M09 where the coal sales also increased 29% from 4.8
million tones in 9M09 to 6.2 million tones in 9M10.
Fig12. HRUM blended ASP and production volume in first nine months
US$/tonne million tonnes
73 7
72.7
6.2
6
72
71.5
5
4.8
71
4
70 3
9M09 9M10
ASP production
Source : Company & Ciptadana Calculation
11

SECURITIES
MSJ produced 3.6 million tonnes of coal in 9M10, a slight increase from 3.4 million
tonnes of coal production in 9M09 where SB produced 1.6 million tonnes of coal in
9M10, a 126% increase from 9M09 coal production of 0.7 million tonnes. We have
included the potential increase of production in our model from the additional coal
production volume that will come from Tambang Batubara Harum (TBH) mine that
will start the production phase in 2011.
Fig13. MSJ and SB production volume in first nine months
million tonnes
4
3.6
3.4
2
1.6
1 0.7
0
9M09 9M10
MSJ SB
Source : Company
Stabilizing rupiah, better ASP

and increase in production are
The net income in 9M10 was Rp569 billion,more than four-fold increase from the
the reason for much
better results in 2011 3M10 where the bottom line stood at Rp134 billion. Year on year basis, HRUM’s net
income of 9M10 only grew 0.1% from Rp568 billion in 9M90, mainly because ex-
treme spike of rupiah against US dollar within the period, where in US dollar the
net income grew 17%. As rupiah is stabilizing and the company will book better
ASP in the near future, we estimate that HRUM will realize 15% growth of net in-
come in FY10 and 104% growth of net income in FY11.
Fig14. HRUM first nine months results

in Rp billion 9M10 9M09 change
Sales 3,159 3,500 -9.7%
Gross profit 1,082 1,295 -16.4%
Operating profit 777 925 -16.0%
Net profit 569 568 0.2%
in USD millions
Sales 346.7 328.6 5.5%
Gross profit 118.8 121.6 -2.3%
Operating profit 85.2 86.9 -2.0%
Net profit 62.5 53.4 17.0%
Source : Company
12

SECURITIES
Fig15. HRUM operating profit and operating profit margin
Rp billion %
5,000 4,677 50
41.6 45
4,000 45.4 40
35.4
35
2,897
3,000 26.6 30
25
2,000 1,515 20
12.4 1,222 15
1,000 8.7 10
323
110 5
0 0
2007 2008 2009 2010E 2011E 2012E
Operating profit Operating profit margin
source : company & Ciptadana calculation
Fig16. HRUM net profit and net profit margin
Rp billion %
4,000 35
28.8 30
25.8 2,968
3,000 25
20.6
20
2,000 16.7 1,794
15
767 880 10
1,000 4.6
2.3 120 5
28
0 0
2007 2008 2009 2010E 2011E 2012E
net profit net profit margin
Greater economies of scale,

better margin as production
increases source : company & Ciptadana calculation
As the production increase, the margin will expand as the company enjoys greater
economies of scale. We estimate the operating profit margin will increase gradually
from 26.6% in FY09 to 45.4% in FY12. The net profit margin should increase from
16.7% in FY09 to 28.8% in FY12, in our view.
13

SECURITIES
Strong balance sheet enables aggressive mode
Thanks to strong growth of coal production and very little debt HRUM is sitting on
cash. Even before the fresh capital from the IPO, the company’s debt to equity ratio
in 3Q10 is a healthy 1.5x. We estimate that the company will be in a net cash posi-
The company has minimum
tion of Rp1.2 trillion and has debt to equity of 0.2x in FY10 .
leverage and is sitting on cash
Fig17. HRUM debt to equity ratio
6 5.8
4
3.4
1 0.8
0.2 0.1 0.1
0
2007 2008 2009 2010E 2011E 2012E
Fig18. HRUM net cash (debt) position
Rp billion
6000
5,162
5000
4000
3000 2,647
2000
1,242
1000
0
2008 2009 2010E 2011E 2012E
-1000 (403) (465)
With ample cash is easy to

conduct aggressive expansion source : company & Ciptadana calculation
The very strong balance sheet enables the company to conduct aggressive expan-
sion in the future without a need to absorb substantial debt addition. This will be the
major competitive advantage for the company as it well be easy to pursue organic
growth or engages in M&A transactions in the future.
14

SECURITIES
Valuation
We use discounted cash flow (DCF) calculation with 15% WACC and 1% terminal
growth to estimate fair value of HRUM. From the calculation we conclude that fair
value of HRUM is Rp9,300/share. Year 2011 is our base year for the DCF calcula-
tion. Our earning estimate of HRUM implies 2011 P/E of 10.9x
Fig19. HRUM Free Cash Flow
Rp billion
3500
2,972
3000
2500
2000
1,589
1500
1000
509
500 242
0
2008 2009 2010E 2011E 2012E
-500 (270)
Fig20. Indonesia coal producers 2011 PE
25
21.6
20
13.8 14.5
15 12.6
10.9 11
9.8
10
0
INDY HRUM BUMI ITMG PTBA ADRO BYAN
source : Bloomberg & Ciptadana calculation
From 2010 to 2012 we estimate that HRUM will generate positive and increasing
positive free cash flows. The increase of the free cash flow will be dramatic as free
cash flow will increase from Rp242 billion in 2010 to Rp2.9 trillion in 2012 or almost
twelve-fold increase in two years
15

SECURITIES
Fig21. HRUM income statement 2008-2012E
Income Statement (Rp billion) 2008 2009 2010E 2011E 2012E
Sales 2,592 4,603 4,280 6,966 10,299
COGS 1,925 2,938 2,191 3,322 4,688
Gross profit 667 1,664 2,089 3,644 5,611
Operating expenses 345 442 575 747 934
Operating profit 323 1,222 1,515 2,897 4,677
Other income (expenses) (125) (9) 14 18 21
Earning before tax 197 1,213 1,529 2,915 4,699
Tax (54) (300) (459) (875) (1,410)
Minority Interests 22 146 190 247 321
Net income 120 767 880 1,794 2,968
Fig22. HRUM balance sheet 2008-2012E

Balance Sheet (Rp million) 2008 2009 2010E 2011E 2012E
Cash 153 587 1,696 3,043 5,520
Account receivables 109 291 268 435 644
Inventory 131 189 175 285 422
Other current assets 89 35 33 53 79
Non-current assets 1,121 1,190 1,520 2,023 2,396
Total Assets 1,603 2,289 3,692 5,840 9,061
Account payable 305 506 470 766 1,132

Current debt 73 37 57 38 38
Other current liabilities 612 800 516 839 1,241
Current liabilities 990 1,343 1,043 1,643 2,411

Long term loan 286 171 114 76 38
Other long term liabilities 93 17 15 16 17
Total Liabilities 1,369 1,530 1,172 1,735 2,466

Minority interest 31 133 200 299 449
Equity 204 626 2,320 3,806 6,147
Total Liabilities & Equity 1,603 2,289 3,692 5,840 9,061
16

SECURITIES
Fig23. HRUM ratios 2008-2012E

Ratios 2008 2009 2010E 2011E 2012E
Current ratio 0.49 0.82 2.08 2.32 2.76
Gross profit margin 0.26 0.36 0.49 0.52 0.54
Operating profit margin 0.12 0.27 0.35 0.42 0.45
Net profit margin 0.05 0.17 0.21 0.26 0.29
Debt to equity 3.39 0.84 0.22 0.11 0.06
Liabilities to Equity 44.88 11.50 5.87 5.80 5.49
Fig24. HRUM assumptions 2008-2012E

Assumptions 2008 2009 2010E 2011E 2012E
Coal production (HRUM only) (mn tonnes) 3.0 4.9 6.3 9.3 12.5
Average selling price (US$ / tonne) 65.1 72.4 73.8 83.2 91.5
17

SECURITIES
EQUITY RESEARCH
Analyst Technical Analyst

Syaiful Adrian Trevor Gasman
Strategy, Banking, Resources Phone : (62-21) 255 74 820
Phone : (62-21) 255 74 919 Email : gasmantrevor@ciptadana.com
Email : adriansyaiful@ciptadana.com
Research Assistant
Analyst Sumarni
Sonny John Phone : (62-21) 255 74 920
Telecommunication, Infrastructure, Property Email : sumarni@ciptadana.com
Phone : (62-21) 255 74 739
Email : johnsonny@ciptadana.com Research Assistant
Silviana Sumardjono
Analyst Phone : (62-21) 255 74 740
Fadil Kencana Email : sumardjonosilviana@ciptadana.com
Consumer, Plantations
Phone : (62-21) 255 74 820
Email : kencanafadil@ciptadana.com
EQUITY SALES
Head of Sales
John Herry Teja
Phone : (62-21) 255 74 808
Email : tejajohn@ciptadana.com
PURI - Kencana Bandung

Chandra Herotionjaya Gavin Ishak
Phone : (62-21) 5835 6025 Phone : (62-22) 732 2288
Email : HerotionjayaChandra@ciptadana.com Email : ishakgavin@ciptadana.com
Lindeteves Surabaya
Wiwi Wijaya Imelda Soetikno
Phone : (62-21) 622 00360 Phone : (62-31) 534 3938
Email : wijayawiwi@ciptadana.com Email : soetiknoimelda@ciptadana.com
Pluit Semarang
Ferry Ishak Lusiana Permatasari
Phone : (62-21) 666 96 688 Phone : (62-24) 354 8989
Email : ishakferry@ciptadana.com Email : permatasarilusiana@ciptadana.com
Bogor Medan
Daud Dirgahayu Juliawaty
Phone : (62-251) 353 325 Phone : (62-61) 4555 600
Email : dirgahayudaud@ciptadana.com Email : juliawaty@ciptadana.com
18
SECURITIES
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DISCLAIMER
This document is not intended to be an offer, or a solicitation of an offer, to buy or sell relevant securities (i.e. securities men-
tioned herein or of the same issuer and options, warrants or rights to or interest in any such securities). The information and
opinions contained in this document have been compiled from or arrived at in good faith from sources believed to be reliable. No
representation or warranty, expressed or implied, is made by CIPTADANA SECURITIES or any other member of the Ciptadana
Capital, including any other member of the Ciptadana Group of Companies from whom this document may be received, as to the
accuracy or completeness of the information contained herein. All opinions and estimates in this report constitute our judgment
as of this date and there can be no assurance that future results or events will be consistent with any such opinions, forecasts or
estimates. The information in this document is subject to change without notice; its accuracy is not guaranteed; and it may be
incomplete or condensed.
19

Riset Harum Energy Oleh Ciptadana Sekuritas

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Riset Harum Energy Oleh Ciptadana Sekuritas

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PT.

Harum Energy Tbk (HRUM) SECURITIES

HRUM vs JCI The growth champion

A very strong growth of well priced coal

Selected Financial Ratios 9M10 results and beyond

Source : Company & Ciptadana Estimates

Fig1. Harum Energy Milestones

 1987:  1995: HE  2002:  2009:  MSJ production

1975-1980 1980-1985 1985-1990 1990 - 2000 2000-2005 2005-2009 2010 Onwards

 1976: Mr. Kiki  1983:  2000: MSJ

PT Harum Energy Tbk (HRUM) November 18, 2010

The Group Overview Fig2. Harum Energy Group

80.0% 50.0% 99.9% 99.1% 100.0%

Barging services and SIUPAL, domestic Headquartered in Transferred to HE in

2009 Production : 0.5 Mt

PT Harum Energy Tbk (HRUM) November 18, 2010

Member of founding family -

General Manager of Mining at PT

Indonesia Deputy Chief of Police

Basrief Arief, S.H. Commissioner Commissioner of MSJ since 2008 2

Deputy Attorney General

Independent Arthur Young International

7 years with Deutsche Bank and

Management team strength :

• More than 150 years combined experience

• Emphasizing on strong financial discipline and solid risk management

• Stable relationship with government and regulatory authorities

• Commitment to good governance, prudent financial management and corporate

PT Harum Energy Tbk (HRUM) November 18, 2010

PT Kaltim Prima Coal

Santan Batubara (SB)

PT Harum Energy Tbk (HRUM) November 18, 2010

Fig5. Harum Energy geological map

PT Harum Energy Tbk (HRUM) November 18, 2010

Pit to Port dist. 40km

Concession area (ha) 20,380

1. JORC resources as of December 31, 2009

PT Harum Energy Tbk (HRUM) November 18, 2010

Santan Batubara (SB)

Pit to Port dist. 45km

Concession area (ha) 24,930

1. JORC resources as of December 31, 2009

PT Harum Energy Tbk (HRUM) November 18, 2010

Tambang Batubara Harum (TBH)

Fig 8. TBH location

Pit to Port dist. 45km

Concession area (ha) 1,886

PT Harum Energy Tbk (HRUM) November 18, 2010

Fig10. Indonesia coal producers average selling price in FY09

PT Harum Energy Tbk (HRUM) November 18, 2010

Fig11. HRUM historical average selling price

9M10 results and beyond

PT Harum Energy Tbk (HRUM) November 18, 2010

Fig13. MSJ and SB production volume in first nine months

Stabilizing rupiah, better ASP

Fig14. HRUM first nine months results

PT Harum Energy Tbk (HRUM) November 18, 2010

Operating profit Operating profit margin

source : company & Ciptadana calculation

Fig16. HRUM net profit and net profit margin

net profit net profit margin

Greater economies of scale,

PT Harum Energy Tbk (HRUM) November 18, 2010

Fig17. HRUM debt to equity ratio

1987: 1995: HE 2002: 2009: MSJ production

1976: Mr. Kiki 1983: 2000: MSJ