Analisa Saham PTBA | 23 November 2018

Maybank (ZP)

PTBA BUY UPGRADE TP 5800 (Fr 5400)

BUY with a higher TP
Maintain BUY on the back of operational improvements. Medium term share price catalysts include earnings and dividends surprising on the upside. We slightly raise our DCF TP (WACC 12.5%, LTG 0%) to IDR5,800 (+7.4%) due to higher earnings forecasts. The stock trades at 9.3x FY19E P/E; undemanding in our view as it is 27% lower than +1SD above the 10- year mean.

Higher forecasts driven by ASP
3Q18 earnings of IDR1,354b increased 20.3% QoQ and 50.1% YoY, and were above our forecast due to better-than-expected ASP. That said, we increase our 2018-19E earnings forecasts on the back of higher ASP assumptions. There could still be upside to our 2018 forecast as we have not factored in potential earnings from selling domestic market obligation (DMO) quota to other coal producers due to limited information. If PTBA manages to sell 2.5m tonnes of DMO volume at USD3/tonne, our 2018 forecast would rise by 1.6%.

2019 flat YoY growth: DMO price impact
For 2019, we forecast earnings will be relatively flat (+1.8% YoY) despite higher sales volume of 26.3m tonnes (+4.3% YoY), as we factor in the full impact of the DMO pricing policy. Although upside to our 2019F forecast could still come from 1) higher-than-expected ASP as PTBA is planning to sell more high CV coal of c.1.5m tonnes (+100% YoY) to ride the strong price momentum and 2) higher-than-expected railway volume post the start of operation of the double-track lane. For every 1% change in both 2019E ASP and volume assumptions, our forecast would change by 5.2%.

Dividend play
We stick with our view that the acquisition of Freeport Indonesia by Inalum would be positive for PTBA’s minority shareholders due to potentially higher dividend streams. Every 5% change in our 2018 payout ratio assumption (75%) would change PTBA’s yield by 50bps.