24 March 2011

INDONESIA EQUITY
Investment Research

FY10 Results Preview

Yusuf Ade Winoto, CFA
+62 (21) 2598 6888
yusuf.winoto@id.oskgroup.com Resource Alam Indonesia
Closing 2010 on a Convincing Note
BUY

Target IDR4,625 KKGI reported FY2010 earnings of IDR166bn, surging by a whopping 418% y-o-y,
Previous IDR4,625 which was in line with our estimate.
Price IDR3,700
Strong topline growth. KKGI’s revenue climbed 138% y-o-y to IDR969bn, driven by
COAL MINING higher sales volume as well as average sales prices (ASP). 2010 coal sales volume totaled
KKGI, a thermal coal producer with a mine 2.2m tonnes, up 133% from 0.9m tonnes in 2009. In addition, ASP also edged up to
concession in East Kalimantan, commenced
production in 2006. In 2010, it produced USD48/tonne, 19% higher compared to the 2009 ASP of USD40/tonne. On the contrary, its
2.2m tonnes of coal, with internally production cash cost declined by 16% y-o-y to USD24/tonne as the larger economies of
estimated coal reserves and resources of
73m tonnes and 127m tonnes respectively.
scale in production gave rise to better efficiency. However, we estimate that the cash cost
in 2011 will be higher due to a higher fuel price and larger production volume.
Stock Statistics
Bloomberg Ticker KKGI IJ Outlook for 2011 remains promising. With contribution from the newly producing blocks
Share Capital (m) 1,000
Market Cap (IDRbn) 3,550 at its mine concession, we estimate that KKGI’s sales volume will jump 63% y-o-y to 3.5m
52 week H│L Price (IDR) 4,075 550 tonnes in 2011. We also envisage the company’s ASP increasing by 17% y-o-y to
3mth Avg Vol (‘000) 1,819
YTD Returns (%) 0.0
USD56/tonne given that the stubbornly high global coal price benchmark will give it more
Beta (x) 0.6 leverage to garner higher contract prices.
Major Shareholders (%)
Deutsche Bank Ag 17.5
Balance sheet position stays strong. At the end of 2010, the company had a total cash
OCBC Securities Pte Ltd 15.8 balance of IDR131bn. Assuming a dividend payout ratio of 40%, this will translate into a
Textron Holdings 16.3 dividend per share of IDR66, which in turn provides a dividend yield of 2%.
UOB Kay Hian Pte Ltd 11.3
Dunway Holdings Ltd 6.0
Public 33.1 Reiterate our BUY call. Given the strong 2010 results, we are maintaining our bullish
stance on the counter. We retain our BUY call with a TP of IDR4,625, which offers a 26%
Share Performance (%)
Month Absolute Relative
upside potential. At present, the counter is still trading at an undemanding multiple of 9x
1m 11.4 5.3 2011f earnings compared to the industry’s consensus average of 15.4x.
3m 25.6 26.7
6m 286.8 267.0
12m 469.2 395.2

6-month Share Price Performance

4,000

3,600

3,200

2,800

2,400

2,000

1,600

1,200

800
10/21/2010 11/30/2010 1/9/2011 2/18/2011 3/24/2011

FYE December (IDR bn) 2008 2009 2010 2011f 2012f

Revenue 338 407 969 1,854 2,511

Net profit 40 32 166 406 585
% chg y-o-y (265.6) (20.9) 418.8 144.7 44.0
Consensus - - - - -
EPS (IDR) 40 32 166 406 585
DPS (IDR) - 5 13 66 163
Dividend yield (%) - 0.1 0.3 1.8 4.4
ROAE (%) 39.1 23.3 73.0 85.7 68.4
ROAA (%) 20.3 12.9 43.2 57.9 51.4
PER (x) 90.8 114.8 22.1 9.0 6.3
PBV (x) 29.7 24.4 12.1 5.7 3.4
EV/EBITDA (x) 58.5 65.4 14.3 5.5 3.5

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 24 March 2011
INVESTMENT THESIS

FY2010 Financial Highlights

In IDR bn 2009 2010 Chg YoY Comments

Revenues 407 969 138.4% in line
COGS (264) (493) 86.9%
Gross profit 143 477 233.2% in line
Operating expenses (98) (256) 161.0%
EBIT 45 221 390.7% in line

Other income/expenses
Interest expense - net (2) (1) -21.6%
Gain on sale of FA 4 0 -97.3%
Interest income - - -
Forex gain/(loss)loss (6) (1) -85.1%
Others 7 18 155.9%
Sub-total 3 16 382.6%
Equity income - - -
Profit before tax 48 237 390.1%
Income tax (16) (71) 334.1%
Profit before minority interest 32 166 418.7%
Minority interest - - -
Net profit 32 166 418.7% in line

Ratios (%)
Gross margin 35.2 49.2
Operating margin 11.1 22.8
Net margin 7.9 17.1

2009 2010 Chg YoY

Operational data
ASP (USD/ton) 40.3 48.1 19.4%
Average cash cost (USD/ton) 26.2 24.0 -8.4%
Sales Volume (m tonnes) 0.9 2.2 133.8%
Production Volume (m tonnes) 1.0 2.2 123.1%

Source: Company

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 24 March 2011

OSK Research Guide to Investment Ratings

Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage

All research is based on material compiled from data considered to be reliable at the time of writing. However, information and opinions expressed
will be subject to change at short notice, and no part of this report is to be construed as an offer or solicitation of an offer to transact any securities or
financial instruments whether referred to herein or otherwise. We do not accept any liability directly or indirectly that may arise from investment
decision-making based on this report. The company, its directors, officers, employees and/or connected persons may periodically hold an interest
and/or underwriting commitments in the securities mentioned.

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