Trimegah Yearbook 2006 INDONESIA

BUY
Tambang Batubara Bukit Asam Price Rp1,800
Domestic Market Finally Pays Off Sector Resources
Reuters / Bloomberg : PTBA.JK/ PTBA IJ

House View & Valuation

A potential windfall profit from rising domestic coal contract prices with PLN (state electricity company) should
enable the company to enjoy a rising average sales price in the midst of unfavorable international coal prices. In
addition, PTBA's power plant projects could double its production by 2009.

With a clean balance sheet and projected 2006 cash of Rp 1.5tr, PTBA should have no problem funding their projects.
Assuming a WACC of 15.3% and a long-term growth rate of 7.2%, our DCF fair value price is Rp 2,100 per share. With
a 2006 PE ratio of 7.1x and an attractive dividend yield of 7.1%, we decide to issue a BUY rating.

Forecast & Rating Recent Developments & Outlook

As has been the case in the last few years, the company's
Year end Dec 2003 2004 2005E 2006F 2007F
coal sales volume was restrained by railway breakdowns.
Net Profit (Rpbn) 210 420 494 588 459 We expect PTBA to produce only 9.2 m tonnes in 2005, 4.0%
EPS (Rp) 91 182 215 255 199 lower than the previous year. According to PTBA, additional
EPS Growth (%) 18.2 99.5 17.7 18.9 (21.8) long-sidings along the track could add an additional capacity
CFPS (Rp) 93 248 256 255 248 of 1 million tons per year.
DPS (Rp) 58 87 107 128 100
PTBA has been unable to take advantage of high coal prices
BVPS (Rp) 605 733 840 968 1,068 due to its long-term contract to sell 70.0% of its coal to PLN
P/E (x) 19.7 9.9 8.4 7.1 9.0 (state electricity company) at "sticky" prices, slow to adjust
P/CF (x) 19.4 7.3 7.0 7.0 7.3 both ways. However, we expect an 17.6% price increase in
P/BV (x) 3.0 2.5 2.1 1.9 1.7 2006 and believe this forecast is justifiable, given the 2005
EV/EBITDA (x) 12.6 5.4 4.1 3.3 3.4 contract's discount of 30.0% to current international prices.
Div. Yield (%) 3.2 4.9 6.0 7.1 5.5
To overcome its rail problems, PTBA plans to transport
electricity instead of coal, by building power plants near its
Profile mines. The Banjarsari power plant has a capacity of 200 MW
(consuming approximately 1.1 million tons of coal annually),
Tambang Batubara Bukit Asam (PTBA) has approximately 1.47bn
and the 3200 MW Banko Tengah power consumes between
of mineable reserves, consisting of 55.0% lignites, 30.0% sub- 10.0-12.0 million tons of coal per year. The Banjarsari project
bituminous and 15.0% bituminous coals. The company transports has been approved by PLN and the Banko Tengah project is
the coal by rail from Tanuung Enim in South Sumatera to the port at still in the process of being tendered. We have included the
Tarahan and the Kertapati pier to be shipped by sea to the Suralaya Banjarsari project in our financial forecast.

power plant in West Java and to its export markets. The company
Additionally, PTBA is also exploring two railway projects,
has been listed on the JSX since 2002. with annual capacities of 20 million tons each. The Ministry of
Transportation is in the process of proposing to parliament to
bend the law, so that private companies are allowed to
operate dedicated tracks. We are optimistic on the prospects
Price Chart of these railway projects, but have not included them in our
forecast due to the level of uncertainty involved.
(Rp) (m)
PTBA should not be affected much by the floated domestic
2,000 60 diesel price, since it uses coal-powered bucket wheel
1,800
50 excavators for half of its production. Assuming an average
1,600
1,400 domestic diesel (HSFO) price of Rp5,340/ liter in 2006, its fuel
40
1,200 related costs represent only 11.0% of COGS, while BUMI's
1,000 30 fuel related costs represent 26.0% of total COGS.
800
600
20
Despite lower expected average international coal prices
400
10 next year, we believe PTBA's average sales price in 2006
200 will rise from USD 31.70/ton to USD 33.50/ton. We also expect
0 -
improved rail situation and higher trading volume to increase
29-Dec-04 08-Mar-05 16-May-05 19-Jul-05 22-Sep-05 01-Dec-05
total sales volume by 9.6%, resulting in an 18.5% sales growth
VOLUME (RHS) PRICE (LHS)
and 18.9% net profit growth.

Analyst: Sebastian Tobing

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 Trimegah Yearbook 2006

Income Statement (Rpbn) Balance Sheet (Rpbn)

Year end 31 Dec 2003 2004 2005E 2006F 2007F Year end 31 Dec 2003 2004 2005E 2006F 2007F

Revenue 2,285 2,614 3,143 3,724 3,478 Cash & Deposits 595 994 1,286 1,473 1,769
% Growth 5.6 14.4 20.2 18.5 (6.6) Other Curr. Assets 701 645 895 1,082 1,005
COGS 1,535 1,573 1,942 2,277 2,186 Net Fixed Assets 528 485 495 508 514
Gross Profit 750 1,041 1,201 1,447 1,292 Other Assets 257 262 234 266 262
Operating Profit 221 503 649 782 631 Total Assets 2,081 2,385 2,911 3,329 3,551
EBITDA 288 591 721 863 721 ST Debts - - - - -
% Growth (31.8) 105.0 22.0 19.6 (16.4) Other Curr. Liabilities 360 433 670 743 668
Net Int. Inc./(Exp.) 44 74 61 62 29 LT Debts - - - - -
Gain/(Loss) Forex (3) 35 39 36 - Other LT Liabilities 319 254 295 347 414
Other Inc./(Exp.) 3 4 (8) (13) (15) Minority Interest 8 9 9 9 9
Pre-tax Profit 265 577 710 844 660 Total Liabilities 687 696 974 1,099 1,091
Tax (53) (156) (213) (253) (198) Shareholders Equity 1,394 1,689 1,936 2,230 2,460
Minority Int. (5) (0) (1) (2) (3) Net (Debt)/Cash 520 956 1,167 1,343 1,665
Extra. Items - - - - - Total Cap. Empl. 1,464 1,690 2,007 2,320 2,621
Net Profit 210 420 494 588 459 Working Capital 935 1,205 1,512 1,812 2,107
% Growth 18.2 99.5 17.7 18.9 (21.8)

Key Ratio Analysis

Cash Flow (Rpbn) Year end 31 Dec 2003 2004 2005E 2006F 2007F

Year end 31 Dec 2003 2004 2005E 2006F 2007F Profitability

Gross Margin (%) 32.8 39.8 38.2 38.8 37.1
Net Profit 210 420 494 588 459
Operating Margin (%) 9.6 19.3 20.7 21.0 18.1
Depr./Amort. 68 87 72 80 91
EBITDA Margin (%) 12.6 22.6 22.9 23.2 20.7
Chg. in Working Cap. (137) 129 (14) (113) 2
Net Margin (%) 9.2 16.1 15.7 15.8 13.2
Others 73 (64) 37 34 20
ROAE (%) 15.3 27.2 27.3 28.2 19.6
CF from Ops. 214 572 590 589 572
ROAA (%) 10.3 18.8 18.7 18.8 13.4
Capex (123) (51) (78) (90) (92)
Stability
Others 15 13 (1) 1 10
Current Ratio (x) 3.6 3.8 3.3 3.4 4.2
CF from Investing (108) (38) (79) (89) (82)
Net Debt/Equity (x) nc nc nc nc nc
Net Change in Debt - - - - -
Int. Coverage (x) 3,242.7 0.0 0.0 0.0 0.0
Others (95) (137) (231) (281) (198)
Efficiency
CF from Financing (95) (137) (231) (281) (198)
Debtors Turnover (days) 17 13 14 20 20
Net Cash Flow 11 398 279 218 292
Creditors Turnover (days) 78 68 64 71 79
Cash at BoY 585 595 994 1,286 1,473
Inventory Turnover (days) 41 36 34 37 42
Cash at EoY 595 994 1,286 1,473 1,769
Free Cash Flow 91 521 512 499 480
Key Assumptions

Interim Results (Rpbn) Year end 31 Dec 2005E 2006F 2007F

Avg. BJI benchmark coal price (US$/ton) 48.0 40.0 36.0
3Q04 4Q04 1Q05 2Q05 3Q05
Average blended selling price (US$/ton) 31.7 33.5 31.2
Sales 775 721 625 694 860 Selling price to Suralaya (US$/ton) 27.8 32.7 31.0
Gross Profit 376 257 255 243 361 Selling price to Bukit Enim (US$/ton) 22.1 25.9 24.6
Operating Profit 265 74 137 58 268 Average blended cash cost (US$/ton) 22.2 23.7 22.6
Net profit 223 84 116 55 254 Total coal produced (ton) 9.2 10.1 10.1
Gross Margin (%) 48.5 35.6 40.7 35.0 42.0 Total coal exported (ton) 2.6 3.6 3.6
Operating Margin (%) 34.2 10.2 22.0 8.3 31.2
Net Margin (%) 28.8 11.6 18.6 7.9 29.5
Capital History & Stock Data

Price and Valuation History Date Event

Dec-02 IPO @ Rp575 per share
2001 2002 2003 2004 2005
Jun-04 Public offering @ Rp650 per share
Price (Rp) Stock Data
- High - 600 975 1,625 1,870 Issued Shares (m) 2,304.1
- Low - 575 475 650 1,300 Par Value (Rp) 500
EV/EBITDA (x) Mkt Cap (Rpbn) 4,147.4
- High na 2.0 6.0 4.7 4.4 12 - Months High / Low (Rp) 1,890 / 1,290
- Low na 1.9 2.0 0.9 2.5 12 - Months average daily t/o (m) 8.9

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