Indo
Tambangraya Megah (ITMG; NEUTRAL; TP:IDR38,000): Site Visit Update - Solid
Future Prospects
ITMG’s
second largest mine site. We
recently visited IndoTambangraya Megah’s (ITMG) mine in Trubaindo, which is the
company’s second largest in terms of production and reserves. We target
Trubaindo facility to produce 7m tones of coal this year, which is 27% of our
FY12 coal production target from all of ITMG’s mines amounting to 26m tonnes
(+6% y-o-y). Coal reserves in Trubaindo stands at 96m tonnes, which translate to
approximately 13 years of mining activity, assuming that production is constant.
Trubaindo has a Coal Contract of Work (CCOW) Gen III license with the highest
calorific value (6,500-7,300 kcal/kg (ADB)) compared to ITMG’s other mines.
Solid
infrastructure and good hauling conditions. On 26
Sept, we took a chartered flight from Balikpapan to the Melak airport, then
travelled by car to the Trubaindo site which is located in West Kutai, East
Kalimantan. The dry season, which was extended by a month, made truck-hauling
conditions easier. Given that ITMG owns its dedicated hauling road, coal
deliveries from South Block to Bunyut port should be both time- and
cost-efficient. Bunyut isTrubaindo-Bharinto’s dedicated port and the point where
coal is transported to Muara Berau and Muara Jawa, both part-transshipment
destinations, before it is delivered to the Balik Papan Coal Terminal, owned by
Bayan Resources (BYAN).
Positive
synergies at work. Trubaindo
is adjacent to the Bharinto mine. Both aggregate mines use Bunyut port and is
expected to jointly produce 15m tonnes of coal in 2015. In terms of production
capacity, there are barge loading and stock pile facilities which are able to
meet the target set. However, the current hauling capacity in Trubaindo-Bharinto
is only around 10m tonnes, thus expanding hauling facilities will be a main
focus going forward. ITMG also has two crushing plants (with a capacity of
1,500/tph per plant) in Trubaindo-Bharinto, which will be able to accommodate
further expansion looking forward. Currently, Trubaindo has agreements with four
mining contractors, with PAMA as the largest partner (60%) as it has the largest
fleet compared to the other three.
The best
outperformer YTD, but still a NEUTRAL. ITMG has
the highest YTD share price performance (+9%) compared to other listed coal
players despite its flat production growth this year. We believe the share price
increase is a short-term momentum on expectation for investors opts for a
dividend player like ITMG, which has a 7% dividend yield for 2012. Note that
ITMG had announced its interim dividend earlier this year, at a 4% yield. We
maintain our NEUTRAL call with a target price of IDR38,000.
source:
OSK
Nusadana Indonesia Equity Research Team dated 1 October 2012
