The other shoe has dropped
What’s New
It is now official. Inco’s CEO, Tony Wenas has tendered his resignation.
A successor will be proposed at the EGM in September.
In the first report regarding the company’s expectations of Karebbe, Inco stated that the hydro‐power plant could have reduced current cash costs by 12% had it come online from the beginning of the year.
Our View
Mr. Wenas’ departure is a continuation of the saga of resignation of senior members of the management. Over the last two years, Inco has lost its CFO, COO, Director of Corporate Affairs, Corporate Secretary, Mining Director, Media and Licensing Director, and now, its CEO.
No one has spoken openly about the reason underlying these departures. However, we speculate that this outcome might have resulted from the combination of local interest group pressure and Vale’s streamlining of the organisation structure.
We revisited our model to adjust for Karebbe after Inco’s guidance.
Previously, we had expected ~45% reduction in cash costs from the 2010 level after Karebbe, which is apparently way off the mark. We erred in assuming that Karebbe could reduce fuel consumption to near zero when the actual reduction is closer to ~20%.
Action & Recommendation
We slash our earning estimates for 2012 and 2013 by 37‐38%. We think Inco’s day‐to‐day operation would not be impacted by the recent change in management. However, as production is expected to stay flat until 2015 and the threat of over‐supply remains menacing, the counter is not attractive. Moreover, the continued strengthening of
the Rupiah vis‐à‐vis the US Dollar has also reduced the company’s profit in Rupiah terms. We thus reduce our TP to Rp4,200 (2011F and 2012F PER of 10.9x and 9.7x) and recommend HOLD.
source: KIM ENG dated 16 August 2011
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment