ANTM Reflection of Conservative Investors 20180918 NHKS Company Report (English)

  Sales growth

  Meanwhile,

  39.0% 78.4% 9.7% 6.1% EBITDA 1,434 3,255 3,160 3,453 Net Profit 136 868 1,045 1,125 EPS (IDR) 6 36 43 47

  EPS growth

  110.6% 535.7% 20.4% 7.7% BVPS (IDR) 769 806 844 887 EBITDA margin 11.3% 14.4% 12.8% 13.1% NPM 1.1% 3.8% 4.2% 4.3% ROE 0.7% 4.6% 5.3% 5.4% ROA 0.5% 2.8% 3.2% 3.2% ROIC 0.6% 5.1% 4.5% 4.3% P/E 110.0x 22.2x 18.4x 17.1x P/BV 0.8x 1.0x 0.9x 0.9x EV/EBITDA 14.8x 8.4x 9.1x 9.2x DPS (IDR) - 2 2 4

  Dividend yield 0.0% 0.2% 0.2% 0.5% Source: Company Data, Bloomberg, NHKS Research

  YTD

  1M

  3M

  12M Abs. Ret. 28.8% -5.8% -11.0% 20.1% Rel. Ret. 36.5% -5.9% -8.9% 19.8%

  2Q18: Downbeat Margin ANTM posted 2Q18’s sales of IDR6.08 trillion (+6% q-q or +347% y-y). On the cumulative basis, 1H18’s revenue reached IDR11.85 trillion (+292.4% y-y).

  2Q18’s net profit was IDR99 billion vs. 1Q18’s net profit of

  Sales 12,654 22,573 24,763 26,281

  IDR246 billion (-60% q-q). Meanwhile, its EBT margin was 3.3% (vs. 5.5% in 1Q18) and net profit margin was 1.6% (vs. 4.3% in 1Q18).

• 3.1%
• 50.0%

  2Q18: Bottom Line Constrained by the U.S. Dollar Its finance costs amounted to IDR190 billion soaring 120% q-q (vs. IDR86

  billion in 1Q18). The biggest contributor is the interest expense of long-term debt and bonds debt interest. Furthermore, the loss of forex gain was IDR173 billion

  soaring 122% (vs. IDR78 billion in 1Q18). 72% of its total debt was in the U.S. dollar denomination sensitive to the trend of rupiah depreciation.

  2018E : Increment in Target of Gold Sales ANTM revised its target of gold sales from 24 tons at the early of 2018 to 25.3 tons consisting of the domestic sales of 13 tons and the exports sales

  of 12.3 tons. Until 8M18, its gold sales reached 18.1 tons consisting of the domestic sales of 10.7 tons and the exports sales of 7.4 tons. The 8M18’s sales reached 71.5% of 2018’s sales target of 25.3 tons of gold.

  Attractive Valuation, Target Price of IDR1,200

  We use an estimate of forward EV/EBITDA of 10.5x (+0.15 SD higher than the last 1 year average EV/EBITDA of 9.9x) as the basis of valuation method. The target price implies a 2019E EV/EBITDA of 11.4x (vs. the current 2018E EV/ EBITDA of 8.1x).

  Firman Hidayat

  Share Price Performance Aneka Tambang Tbk | Summary (IDR bn) 2017 2018E 2019E 2020E

  firman@nhsec.co.id

  52 wk range (Hi/Lo)

  Please consider the rating criteria & important disclaimer Company Report | Sept 18, 2018 Aneka Tambang Tbk (ANTM) Reflection of Conservative Investors

  Buy Dec 2019 TP (IDR) 1,200 Consensus Price (IDR)

  1,238

  TP to Consensus Price

  vs. Last Price

  Shares data Last Price (IDR)

  800

  Price date as of

  9/14/2018

  1,015/600

  Mining Metal & Mineral Bloomberg ANTM IJ Reuters ANTM.JK

  Free float (%)

  35 Outstanding sh.(mn) 24,031

  Market Cap (IDR bn)

  15,019

  Market Cap (USD mn)

  1,109

  Avg. Trd Vol - 3M (mn)

  29.67 Avg. Trd Val - 3M (bn)

  19.83 Foreign Ownership 5.6%

• 62 21 797 6202, ext:170

  1H18: Tumbling Global Demand for Gold The total global demand for gold in 1H18 tumbled by 6.1% to 1,960 tons: the lowest since 2010. The demand for gold as jewelries remains flat (-0.38% y-y) to 1,031 tons; the demand for gold as investment decreased by 19.8% y-y to 570 tons, whereas the demand for gold for tech.

  components raised 3.1% y-y to 165 tons. Meanwhile, the gold purchase by world bank surged by 8.4% y-y to 193 tons. The decrease of 5.9% y-y (338 tons in 2Q18 vs. 363 tons in 2Q17) in demand for gold by India was the major factor tumbling the demand for gold. Moreover, the demand for gold by China was flat at 510 tons.

  Gold Rush by China We project that in 2H18 China likely gives the biggest contribution to the growth in the global demand for gold. Until 1H18, the demand for gold by China reached 510 tons. In

  ahead years, the upbeat demand for Gold by China breeds two positive impacts as follows:

  First, the impacts of China and the U.S. trade war. Investors’ concerns about the further

  trade war, yuan depreciation, and soaring inflation likely trigger gold purchase for hedging and diversification into investment portfolios.

  Second, investment backdrop in China. The policy on limited investment in property

  enacted by China’s authorities is favourable to gold because such policy makes gold as the low–in-risk asset, globally-traded asset, and hedging-value asset against currencies depreciation.

  Four Positive Factors

  We project four positive factors boosting ANTM’s target of gold sales in 2H18 as follows:

  Further innovation in gold bullion. Varied editions and product package such as

  1) hello kitty, Chinese New Year, Idul Fitri, Christmas, batik, as thin as card-type gold editions. 2) Increment in the number of distribution channels. Offline gold sale partnership BJB

  Sharia Bank, Pos Indonesia, Pegadaian, and online gold sale partnership with bukalapak (bukaemas), tamasia, etc.

  3) Marriage season from September to December. The phenomenon of marriage

  season during the rainy season from September to December send the sales of gold jewelry such as rings, gold bullions as dowries to soar.

  4) LBMA Certificate. ANTM is the only ASEAN-based gold producer having London Bullion

  Market Association (LBMA) certificate. Having the LBMA certificate, ANTM has a strong bargaining power to compete in the global market because it guarantees that ANTM’s gold has purity content of 99%, is free of money laundering and human rights violation, and involves in any of conflicts.

  Investment Risks

  We oversee a number of risks impacting on ANTM’s lagging performance in future years, namely 1) The decline in global prices of gold and nickel; 2) The lagging growth in Indonesia’s economy; 3) The heavy rainfalls; 4) The trend of rupiah’s exchange rate depreciation for the U.S. dollar.

  Source: Company, NHKS Research Global Gold Price | 2013 - 2018

  Source: Company, NHKS Research Gold Production vs. Sales Volume | 2012- 2019F

  Revenue Breakdown | 2Q18 Source: Company, NHKS Research

  Revenue & Growth | 2013 - 2019F Source: Company, NHKS Research

  Performance Highlights Gold Revenue & Gold ASP | 1Q12 - 4Q18F

  Source: Company, NHKS Research COGS Breakdown | 2Q18

  Source: Company, NHKS Research

  2Q18 review (IDR bn)

  2Q18

  3Q18E

  2Q17

  3Q17

  4Q17

  1Q18 Actual Estimate y-y q-q surprise

  Sales 1,360 3,951 5,692 5,731 6,084 6,015 347.3% 6.2% 1.2% 5,597 Gross Profit 52 735 774 728 875 764 1577.4% 20.2% 14.5% 928

  Gross Margin 3.8% 18.6% 13.6% 12.7% 12.7% 10.5% 1.7% 16.6%

  14% 1.7%

  17.2% 41.7%

  EBIT -146 463 368 479 561 396 -483.9% 684

  EBIT Margin 11.7% 6.5% 8.4% 6.6% 20.0% 2.6% 12.2%

• -10.7% 9% 0.9%

  EBITDA 52 724 563 707 791 622 1427.4% 11.9% 27.2% 921

  EBIT Margin 3.8% 18.3% 9.9% 12.3% 10.3% 9.2% 2.7% 16.5%

  13% 0.7%

  

Net Profit 503 165 468 246 99 229 -119.6% -59.8% -56.9% 301

• - Net Margin 4.2% 8.2% 4.3% 3.8% 38.6% 5.4%
• -37.0% 2% -2.7% -2.2%

  Source: Bloomberg, NHKS research Earnings revision (IDR bn) 2018E 2019E 2020E

  22,573 24,763 26,281

• Revised Sales
>Previous 24,079 25,311 26> -Change -6.3% -2.2% -1.1%

  3,362 3,554 3,772

• Revised Gross Profit
• Previous 3,083 3,240 3,402
• Change 9.1% 9.7% 10.9%
• Revised 14.9% 14.4% 14.4% Gross Margin

  12.8% 12.8% 12.8%

• Previous EBIT -Revised 2,318 2,142 2> -Previous 1,767 1,878 1
• Change 31.2% 14.1% 15.4%

  10.3% 8.7% 8.7%

  EBIT Margin -Revised

• Previous 7.3% 7.4% 7.4% EBITDA -Revised 3,255 3,160 3> -Previous 2,677 2,817 2
• Change 21.6% 12.2% 16.8%

  14.4% 12.8% 13.1%

  EBITDA Margin -Revised

• Previous 11.1% 11.1% 11.1%
• Revised

  Net Profit 868 1,045 1,125

• -Previous 1,017 1,248 1,260
• -Change -14.7% -16.3% -10.7%
• Revised 3.8% 4.2% 4.3% Net Margin

  4.2% 4.9% 4.7%

• Previous

  Source: NHKS research

  ANTM at A Glance

  Aneka Tambang (ANTM) is a state-owned miner whose business activities cover exploration, mining, processing, and marketing varied mineral commodities such as gold, nickel, nickel ore, silver, bauxite, and mineral.

  

Until the current time, more than 50% of ANTM’s total revenue derives from gold sales, whereas the ferronickel sales

contributing around 20%-30% to its overall revenue is the second-biggest sales contributor. In ahead years, it focuses

  on maximizing the sale of gold, nickel, and bauxite products. Because ANTM’s products are mostly exported, it sells its products in the U.S. dollar denomination. It major consumers are internationally leading companies across Europe and Asia.

  To expand its marketing network, ANTM has Tokyo-based representative office serving the Asia Pacific market. Its preference is long-term contracts with fixed sales volume and price scheme referring to global commodity market price as the fundamental of long-term growth.

  ANTM’s Competitiveness in Asia

ANTM is the only ASEAN-based gold producer whose products are certified by LBMA to content with 99% pure gold. It

equips ANTM with a competitive advantage to penetrate the international gold purchase and sale market.

  ANTM has a small-scaled market capitalization compared to its Asia-based peers, but it is capable of posting a more substantial sales than its peers having bigger market capitalization. In addition,

  it has an interesting valuation of EV/EBITDA of 8.1x and P/BV of 1.0x, but it has less efficient net margin performance of only 5%. Besides, its return on equity (ROE) of only 5% is small.

  However, we estimate that ANTM likely maintains its position as the ASEAN-based leader in gold producer markets along the increment in production, the innovation in products and gold bullion packages, and the higher gold prices. Accordingly, it remains to have further rooms to grow in the global market.

  Asia Pacific Mineral Mining Company Market Sales Net Profit Net Profit EV/ Asset Net Profit ROE Company Cap LTM LTM Growth EBITDA P/BV (USD mn) Margin LTM (USD mn) (USD mn) (USD mn) LTM LTM Indonesia

  ANTM IJ 1,302 2,209 1,578 72 468% 5% 5% 8.1x 1.0x

  INCO IJ 2,281 2,185 712 36 7474% 5% 2% 14.6x 1.2x MDKA IJ 724 371 201 70 N/A 35% 38% 5.7x 3.0x

  China

ZHONGJIN GOLD CORP

  3,399 5,919 5,042 31 -47% 1% 2% N/A 1.7x

YINTAI RESOURCES

  2,277 831 470 76 108% 16% 8% N/A 1.9x

INNER MONGOLIA

  2,323 2,900 3,118 173 35% 6% 11% N/A 1.6x

  Taiwan

KING SLIDE WORKS

  1,199 333 144 52 24% 36% 18% 18.3x 4.0x

  Australia

  MINERAL RESOURCES 2,052 1,542 1,259 211 35% 17% 23% 5.9x 2.2x OZ MINERAL 2,024 2,208 859 216 75% 25% 11% 4.1x 1.0x

  INDEPENDENCE GROUP 1,806 1,608 603 41 210% 7% 3% 8.8x 1.4x

  Source: Bloomberg

  Source: Company, NHKS Research Hello Kitty Edition of Gold Variant | 2018

  Source: Company, NHKS Research Imlek Edition of Gold Variant | 2018

  Tamasia : Online Platform for ANTM’s Gold Purchase Source: Company, NHKS Research

  Batik Truntum Edition of Gold Variant | 2018 Source: Company, NHKS Research

  Product Review London Bullion Market Association (LBMA) Certificate

  Source: Company, NHKS Research Pegadaian : ANTM’s Gold Saving Book

  Source: Company, NHKS Research Multiple Valuation Forward EV/EBITDA band | Last 2 years Dynamic Forward EV/EBITDA band | Last 2 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

  05/02/2018 Buy 985 (Dec 2018) 810 1,065 +21.6% -7.5% 09/18/2018 Buy 1,200 (Dec 2019) 800 1,238 +50.0% -3.0%

  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%

   Hold : -15% to +15%  Sell : Less than -15% Summary of Financials

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