Analisa Saham PTBA | 11 April 2018

Analisa Saham PTBA
Trimegah (LG) 11 Apr 2018

*PTBA; BUY TP 4,000 - "When there is action, there is always reaction"*

Impact from DMO pricing cap would not be that severe..
We slightly reduce our 2018 EPS by 4% to take into account 1.5% lower blended ASP coming from following changes in our model: 1) we now assume 25% of PTBA’s volume to be sold to PLN at 12.5% lower and another 25% of PTBA’s volume to be sold to PLN at 6.125% lower price due to the new price cap regulation, and 2) we now assume PTBA to produce 2.5mn tonnes (c10% total production) of high CV Bituminous coal with quality of 6,400-6,700GAR (c33% higher vs current blended quality c4,900GAR) which gives positive impact to blended ASP by +3.3%.

..and account receivables should improve
We do not see price capping as an entirely negative development as we view that: 1) Having lower price but paid on time is not that different than charging higher price but customer delays payment. We expect AR to return to normal in 2018 after climbing from 42 days in 2015 to 72 days in 2017. 2) When there is action, there is always reaction. We think there is still potential upside in additional volumes of higher grade coal (approximately 34% of reserves is high grade).

The only upstream sizable coal likely to beat consensus’ earnings
Among sizable upstream coal companies under our coverage, PTBA is the only one with can beat consensus earnings as sell-side analysts have become too pessimistic with selling price (likely due to DMO).

Expect higher dividend payout ratio, translates to 5.9% yield
We raise our dividend payout estimate for 2017 profit from 40% to 50% as we think new owner Inalum is likely to request higher dividend (PTBA direct ownership was changed from government to Inalum, a state owned company that has become a mining holding company). We believe this higher dividend could be a structural trend.

Valuation
We maintain our BUY recommendation on PTBA with slightly higher SOTP-based TP of IDR4,000. It is 5% higher from our previous TP due to slight changes in our WACC assumption (refer to page 3). Our TP implies 10.9x 2018F P/E. PTBA is trading at 9.0x/9.4x 2018-19 P/E. Downside risks are significant drop in coal price and goverment intervention. Upside risks are higher than expected coal price, more power plant projects, and potential MSCI inclusion.