StockNote

Dang Maulida
dang.maulida@ipc.co.id (62-21) 5793 1168 (62-21) 5793 1167 16 June 2009

PT Tambang Batubara Bukit Asam Tbk

Rp13,000 BUY PTBA 2009 Coal Pricing
PTBA, on May 29 2009, announced that it had reached agreement with state-owned PLN to supply coal to Bukit Asam plant at a price of Rp407,500/ton, an increase of 45% YoY, and to Tarahan power plant at Rp525,000/ton, an increase of 20%, YoY. In response to the new pricing, we altered our earnings estimate. In addition, in view of continuing decline of the BI rate, we lower our WACC in the DCF calculation to 14.1% (from previously 15.4% to arrive at a new target price of Rp18,512/ share vs. previously Rp11,725 per share). At yesterdays closing price of Rp13,000, the share is trading at 10.8 FY09 earnings, representing a significant discount to the market rating. At our TP, the share price is trading at 15.4 times FY09 earnings, at the lower end to the most recent historical multiple trading ranges. Given expected superior earnings growth this year, we view that PTBA may trade at a premium to the market level. PTBA is a fundamentally good company and we maintain our recommendation. BUY

Indonesia Mining
RECOMMENDATION 12M rating 12M target price (Rp) Upside (downside) SHARE STATISTIC Out shares (b) Market Cap (Rp b) 12M Hi-Lo (Rp)

BUY Unchanged 18,512 42%

Higher selling price to Bukit Asam and Tarahan

2.30 29,954 17,000 4,150 35% 88% (11%)

STOCK PRICE PERFORMANCE 1M 3M 12M MAJOR SHAREHOLDERS Government Directors Employees Publik

65.02% 0.02% 0.22% 34.74% chg 89% 30% 158% 59% 201% 700% 217% 221% 223%

Price negotiations for 2009 supply of coal to Bukit Asam and Tarahan power plants finally closed and announced on May 2009 with prices settled at 45%, and 20% higher than those of last year, for Bukit Asam and Tarahan plant, respectively. Before the announcement, shipments to Bukit Asam and Tarahan were based on 2008 prices, therefore, selling prices would be adjusted retrospectively for the full year. We set our weighted ASP for domestic sales for 2009 at Rp669,273/ton (Tabel 1), an increase of 32%, YoY, while for export sales, we expect a weighted ASP of US$58.4/ton.
Table 1: Estimated 2009 Domestic Weighted ASP Customer Suralaya Tarahan Bukit Asam Others ASP (Rp) Sources: Companies, IPS Estimates Volume (ton) 4,100,000 800,000 1,100,000 3,425,000 Price / ton (Rp) 884,000 525,000 407,500 530,000 Revenue - Domestic (Rp) 3,624,400,000,000 420,000,000,000 448,250,000,000 1,815,250,000,000 669,273

LATEST RESULTS (Rp b) 1Q09 1Q08 Sales 2.330 1.234 COGS 874 670 Gross Profit 1.457 564 Op. exp 271 171 Op. profit 1.186 394 Other inc/(exp) 105 13 Pre-tax inc 1.291 407 Net profit 921 286 EPS (Rp) 400 124 Source: Company Data, IPS Estimates

RELATIVESTOCKPRICEPERFORMACE (early2005=100)
1,200 PTBA 1,000 800 600 JCI Index

Given the aforementioned set of ASPs, and with FY2009 sales volume of 14.5mn ton , an increase of 14%, YOY, we came to an estimated net profit of Rp2.78 trillions, representing an annual growth of 63%, which is superior compared to growth of other listed companies in the BEI. Our FY09 earnings forecast for PTBA is in-line with earnings consensus listed in the Bloomberg.

Reduced risk of contract repricing

400 200 Jan05 Jul05 Jan06 Jul06 Jan07 Jul07 Jan08 Jul08 Jan09

Source:Bloomberg Refer to Disclaimer Statement at the last page of this report

Recent revive of world oil price and coal price will benefit PTBA in three ways. First, closing the already prolonged negotiation of Bukit Asam and Tarahan plants, at a higher prices. Second, reduced risk of contract repricing, especially for Suralaya plant. Third, higher selling price for unsold portion for both domestic and export sales. As for how long recent hike in coal price may stay, we view recent gradual rise in coal price can hold on into the medium term, for the following assumptions:

PT Tambang Batubara Bukit Asam Tbk BUY

1) 2) 3) China will still be a net importer for next 2-3 months, given the higher domestic price which hover around US$90/ton against spot world coal price of US$60/ton Recent partial US economy recovery will form expectations that will support oil price at the US$65 level , that, in turn, will be a support for coal price Thermal coal demand wil stay strong for Indonesia, China, and India as reflected by prolonged price negotiations between coal suppliers and power producers in respective countries

Oil Price, Coal Price and PTBA shares prices

PTBA shares , oil and coal prices ( US$/ton )
250.00 June-Dec 2008, PTBA share prices reflected oil price dynamic 200.00 Jan-Dec 2009, expect to reflect fundamental supported by oil and coal prices

( Rp)
19,000 17,000 15,000 13,000 11,000 9,000

150.00

100.00

7,000 5,000

50.00

3,000 1,000

1Jan08 1Feb08 3M ar31M ar30Apr08 30M ay30Jun08 31Jul08 1S ep1Oct08 3Nov08 1D ec31D ec30- 27Jan- Feb09 09 PTBA (RHS) 1Apr09 30Apr09 2910M Junay-09

(1,000)

WTI (LHS)

Coal (Australia - Newscastle)**LHS

Sources: Bloomberg

We view major sell off of the shares starting middle of last year reflected investors excessive worry of effect of the then declining spot coal price to PTBA fundamental, aside from the general negative climate of world share prices at the time. Starting in middle December 2008, PTBA share prices gradually increase and show some stabilization, before increase significantly , post April 2009 to close at Rp13,000 level, some 24% below all time high of Rp17,000 on July 01, 2008 when coal price was at US$224/ton and WTI at US$141 per barrel, and at historical PER of 22 times. We see that not all PTBAs FY09 performances priced in the share price, and positive sentiment from increase of commodity prices may also boost share price once again to its all time high. Investors may use the momentum to collect PTBA shares prices when prices weakened.

Valuations At current closing price of Rp13,000, PTBA share is trading at 10.8 times FY09 earnings, well below the BEI market that trades at 20 times FY09 earnings. Meanwhile, at our TP, Rp18,512, PTBA share prices is trading at 15.4 times FY09 earnings , still below historical high multiple of 22 times earnings. Given current valuations and earnings prospects and with PTBA share prices trading at higher historical multiple, we see that, once again, the share price can refer back to higher multiple ranges (12-15 times earnings).

PT Tambang Batubara Bukit Asam Tbk BUY

( Rp ) 40000

PTBA Historical Trading Range 2003 - 2008

35000

1) reach all time high 22 X historical earnings 2) will revert back to 12 X-15 X earnings 1) 2)

30000

25000

20000

15000

10000

5000

0 Wed Dec 31 2003 Wed Mar 31 2004 Wed Jun 30 2004 Thu Sep 30 2004 Fri Dec 31 2004 Thu Mar 31 2005 Thu Jun 30 2005 Fri Sep 30 2005 Fri Dec 30 2005 Fri Mar 31 2006 Fri Jun 30 2006 Fri Sep 29 2006 Fri Dec 29 2006 Fri Mar 30 2007 Fri Jun 29 2007 Fri Sep 28 2007 Mon Dec 31 2007 Mon Mar 31 2008 Mon Jun 30 2008 Tue Sep 30 2008 Wed Dec 31 2008 Tue Mon Sun Mar Jun Sep 31 12 27 2009 2009* 2009*

Sources : Bloomberg

Actual Price IDR Px=8892@p/e of 12.00

Px = 21489 @ p/e of 29.00 Px = 5928.0 @ p/e of 8.00

Px = 16302 @ p/e of 22.00

Px = 11115 @ p/e of 15.00

Recommendations PTBA is among coal producers with superior earnings growth this year, and with strong balance sheet. Also, PTBA has planned strategies to secure long term growth. Fundamental bodes well with current valuations, therefore we maintain our BUY recommendation at higher target price of Rp18,512 per share over the next 12 months, offering investors 42% potential upsides. BUY
Forecasts and Valuation 2007 Revenue (Rpb) Pre-tax (Rpb) EPS (Rp) EPS growth (%) BV/share (Rp) PER (x) PBV (x) DPS (Rp) Dividend yield Source: IPS Estimates 4,124 1,010 315 50% 996 41.3 13.1 165 1% 2008 7,216 2,552 741 135% 1,161 17.5 11.2 372 3% 2009E 9,425 3,798 1,205 63% 1,735 10.8 7.5 200 2% 2010E 10,523 3,666 1,164 -3% 2,830 11.2 4.6 200 2%

PT. INDO PREMIER SECURITIES

Head Office
Wisma GKBI 7th Floor Suite 718 Jln. Jenderal Sudirman Kav.28 Jakarta 10210 Tel. (62-21) 5793 1168 Fax. (62-21) 5793 1167

Branch Office
Boulevard Artha Gading Blok A7A No. 3 Kelapa Gading, Jakarta Utara Tel. (021) 4587.4168 Fax. (021) 4587.4167 Wisma Dharmala Surabaya Lantai Mezzanine Jl. Panglima Sudirman 101-103 Surabaya 60271 Tel. (031) 5487050 Fax. (031) 5487051 Jl. Sulawesi No. 88 Makassar 90174 Tel. (0411) 333.168 Fax. (0411) 333.167 Graha International Lantai 1 Jl. Asia Afrika 129 Bandung 40112 Tel. (022) 4221758 Fax. (022) 4221778 Jl. Sultan Agung No.104-106 Semarang 50232 Tel. (024) 850.5961 Fax. (024) 850.5962 Gedung Uniplaza Lt.3 West Tower Jl. M.T. Haryono No. A-1 Medan Tel. (061) 4550168 Fax. (061) 4552371

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