Other
key points from the report:
· Jayden
downgrades both Indo Tambangraya (ITMG IJ) and PTBA (PTBA IJ) to
O-PF from BUYs. All other recommendations remain unchanged. He downgrades
ITMG and PTBA’s TP to Rp39,000 and Rp16,500 from
Rp41,000 and Rp17,500 respectively. But both ITMG and PTBA are
still his top picks in the sector.
· He
also raises Adaro (ADRO IJ)’s TP to Rp1,400 from Rp1,330
but lowers Harum Energy (HRUM IJ)’s TP to Rp5,800 from
Rp6,200. Both recs remain UPF. Finally INDY and BUMI’s TP are
reduced to Rp2,000 and Rp1,100 from Rp2,100 and Rp1,300 respectively.
· CLSA
has reduced our forecast seaborne thermal coal prices by 8%
to US$99/t in 12CL and 9% to US$100/t in 13CL. Weaker
demand, lower cost inflation and less RMB appreciation all contribute
to a softening of the cost curve versus our original forecast. As
a result of the price change, we reduce average earnings in 12CL by
7% and in 13CL by 19%.
· Our
earnings estimates are on average 20% and 13% below
consensus in 13CL and 14CL meaning near term appeal will be
subdued in the face of broker downgrades. Assuming a US$100/bbl oil price
we estimate consensus is currently forecasting US$110/t average
seaborne price for both 13CL and 14CL.
· For
investors that have to be in the sector, we recommend ITMG and PTBA
though we downgrade both from to O-PF recommendations. We retain
BUMI, ADRO and HRUM as U-PFs and recommend switching to ITMG or
PTBA due to their relative safe-haven status.
· ADRO has a
lower yield vs peers due to higher capex and we are concerned on
potential shareholder value erosion from a recent related party transaction.
HRUM is most exposed to near term spot price weakness vs
peers due to a higher degree of index linked and spot contracts.
We see most risk of downgrades to 2012 consensus earnings to this stock and
BUMI.
