PTBA Flaming Brightly amid Coal Policy 20180807 NHKS Company Report (English)
1H18’s Performance Review: Buoyant Exports PTBA enjoyed the growth of 49.4% y-y to IDR2.57 trillion in net profit, thanks to the upbeat sales volume and exports average selling price (ASP). The exports volume surged 51.2% y-y to IDR6.2 million tons vs.
Buy Dec 2018 TP (IDR) 5,375
IDR4.1 million tons in the 1H17, while the exports ASP beefed up 14.2% y-y. The uptrend of higher global coal price was the potent driver for the rosier ASP. We project that the global coal price likely tops USD85-90/ton until the end of 2018.
Meanwhile, the least heavy rainfall sent the production volume higher by 19.2% y-y. We project that the 2H18’s production volume likely snaps higher by 26.9% to 14.2 million tons vs. 11.2 million tons in the 1H18.
Optimizing Low to Medium Calories
We estimate that the currently dry season is a potent driver for the escalating demand for electric supply of air conditioners; therefore, the demand for global coal escalates amid the downward electricity supply by China-based hydro power plants. We estimate that PTBA can make use of that momentum to increase the FY2018’s exports volume to hit 12.4 tons soaring by 42.5% y-y.
We oversee that the strategy of optimizing exports of low-to-medium calories coal is a logical takeaway for PTBA’s outperformance and an anticipation of the possible amendment of DMO’s policies.
Consensus Price (IDR) 4,600 TP to Consensus Price +16.8% vs. Last Price +17.4% Shares data
Last Price (IDR) 4,580 Price date as of August 6, 2018 52 wk range (Hi/Lo) 4,650/1,810 Free float (%)
35.0 Outstanding sh.(mn) 11,521 Market Cap (IDR bn) 52,880 Market Cap (USD mn) 3,657 Avg. Trd Vol - 3M (mn)
35.87 Avg. Trd Val - 3M (bn) 144.88 Foreign Ownership 8.0%
Mining Coal Bloomberg PTBA IJ Reuters PTBA.JK
Firman Hidayat
- 62 21 7976202, ext:170
Sales 14,059 19,471 23,776 24,758
Sales growth 2.4% 38.5% 22.1% 4.1%
firman@nhsec.co.id
2016/12A 2017/12A 2018/12E 2019/12E
Abs. Ret. 86.2% 15.9% 40.1% 66.5% Rel. Ret. 90.2% 8.9% 36.5% 60.5%
12M
3M
1M
Share Price Performance YTD
Dividend yield 0.5% 11.8% 8.1% 8.7% Source: Company Data, Bloomberg, NHKS Research
9.5x 3.9x 5.9x 5.5x DPS (IDR) 12 291 370 398
2.7x 2.1x 3.3x 2.9x EV/EBITDA
14.4x 6.3x 9.3x 8.6x P/BV
BVPS (IDR) 916 1,198 1,394 1,557 EBITDA margin 20.7% 33.8% 34.6% 35.4% NPM 14.3% 23.0% 23.9% 24.7% ROE 20.2% 36.8% 38.0% 36.0% ROA 11.3% 22.1% 25.9% 26.5% ROIC 15.4% 31.7% 35.6% 34.2% P/E
EPS growth 3.6% 117.1% 16.1% 7.6%
Bukit Asam Tbk | Summary (IDR bn)
EBITDA 2,909 6,584 8,234 8,756 Net profit 2,006 4,476 5,680 6,112 EPS (IDR) 196 425 493 531
Please consider the rating criteria & important disclaimer Company Report | Aug 7, 2018 Bukit Asam Tbk (PTBA) Flaming Brightly amid Coal Policy
Target Price of IDR5,375
We recommend buy by hiking the target price of IDR5,375 (vs. the prior target of
IDR3,950) in the end of 2018. We use an estimate of forward P/E of 10.2x (+0.5SD higher than the last 5-year average of 8.3x) as the basis for valuation method. The target price
implies a 2018E P/E of 10.9x (vs. 9.3x at the current time)
Reap Benefit of Quota Transfer Scheme
The FY2018’s total domestic sales is estimated to reach 13.7 million tons or 54% from the total production. Its estimated achievement in sales enables PTBA to comply with the domestic market obligation (DMO) requirements of supplying coal production of 25% at the minimum to the domestic market. Assuming that 25% of PTBA’s coal production in the amount of 6.3 million tons, we estimate that under the quota transfer scheme its overproduction of 7.3 million of coal that can be sold to other miners.
In additional, we also project that under the quota transfer scheme, the coal product can be sold at a discount of 40% of the average benchmark coal prices (HBA) of USD102/ton; thus, the prices based on the applied scheme is USD61.2/ton higher than the normal prices of USD46/ton under DMO scheme. It obtains the additional sales of IDR1.4– IDR1.6 trillion (6%-7% of a 2018E’s total sales)
PTBA at A Glance
PT Bukit Asam (PTBA) is a state-owned coal miner whose mining concessions are situated in Sumatera. It has 11.5 billion tons of low to mid calories coal (4,800 kcal/kg –6,700 kcal/ kg). The incorporation of a mining holding under PT Asahan Aluminium (Inalum) on November 29, 2017 was followed by the stock split with a ratio of 1:5 by PTBA on December 14th, 2017.
Coal Industry in Asia Pacific
Indonesia is the second biggest coal miner in Asia Pacific, while China positions as the first biggest coal producer in Asia Pacific. Compared to its peers in Asia Pacific, PTBA has a relatively smaller total asset yet likely similar market capitalization value. Indeed, its return on Equity (ROE) of 43.4% is the biggest among its peers’ ROE, and gross margin of 44% recognizes its efficiency.
Asia Pasific Coal Mining Companies Total Sales Gross Operating Net Profit Market Cap ROE P/E Dividend Company Asset Growth Margin Margin Growth (USD mn)
(LTM) (LTM) Yield (USD mn) (LTM) (LTM) (LTM) (LTM)
PTBA 3,657 1,618 38.5% 43.7% 30.3% 76.5% 43.4% 9.1x 7.0% ADRO
4,330 6,814 29.1% 35.0% 29.3% 23.8% 13.6% 9.4x 5.5%
ITMG 2,230 2,230 23.5% 29.9% 23.0% 53.8% 29.2% 8.6x 11.0%
China
SHANXI XISHAN COAL 3,170 8,892 44.7% 30.3% 13.0% 42.3% 9.6% 12.3x 0.6% SHANXI LUAN ENVIRONMENT
3,763 10,216 65.4% 35.7% 20.5% 122.0% 14.5% 8.6x 3.3%
INNER MONGOLIA 3,733 12,996 61.1% 30.7% 21.9% 77.3% 18.7% 5.5x 5.5%
Thailand
BANPU 3,230 8,251 22.1% 38.6% 16.7% 57.9% 6.4% 20.5x 3.1%
Phillipine
SEMINARA MINING Ltd 2,584 1,372 20.1% 53.7% 35.1% 6.0% 38.0% 10.8x 7.8% DMCI HOLDING Ltd 3,069 3,437 18.2% 42.7% 26.6% 11.8% 21.1% 10.6x 3.9%
Source: Bloomberg, NHKS research
Performance Highlights
Coal Production & Sales Volume (mn ton) |1Q16 - 4Q18E Average Selling Price (ASP) (USD/ton) | 1Q16 - 1Q18E
Source: Company, NHKS research Source: Company, NHKS research
Sales Composition | 1Q12 - 1Q18E PTBA Sales & Coal Price|1Q12 - 4Q18E
Source: Bloomberg, NHKS research Source: Company, NHKS research
Margin Ratios|1Q12 - 4Q18E COGS Composition | 1H18
Source: Company, NHKS research Source: Company, NHKS research
Multiple Valuation
Forward P/E band | Last 5 years Dynamic Forward P/E band | Last 5 years
Source: NHKS research Source: NHKS research
Rating and target price update Target Price Revision
Date Rating Target Price Last Price Consensus vs Last Price vs Consensus
10/25/2017 Buy 3,235 (Dec 2018) 2,360 2,912 +49.8% +11.1% 04/25/2018 Buy 3,950 (Dec.2018) 3,360 3,675 +17.6% +7.5% 08/07/2018 Buy 5,375 (Dec.2018) 4,580 4,600 +17.4% +16.8% Source: Bloomberg, NHKS research.
Analyst Coverage Rating Closing and Target Price
Source: Bloomberg Source: NHKS research
NH Korindo Sekuritas Indonesia (NHKS) stock ratings
1. Period: End of year target price
2. Rating system based on a stock’s absolute return from the date of publication Buy : Greater than +15%
: -15% to +15% Hold : Less than -15% Sell
Summary of Financials
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