Aneka Tambang – Shining through (ANTM-BUY-IDR2,250-TP:IDR3,000) - Bahana Sekuritas

4Q10: Solid operating earnings; Higher than expected other incomes Aneka Tambang (ANTM) reported 4Q10 net profit of IDR712b (+267% q-q, +167% y-y) which brought full-year earnings to IDR1,663b (+197% y-y), coming in some 10% above our consensus estimates. At the operating level, earnings were some 7% higher than consensus, but were in line with our estimate. The strong set of results was backed by a jump in operating profit (+300% q-q) as well as lower financing charges (-61% y-y). On the top line, 4Q10 revenues were up 113% q-q primarily on higher ferronickel volumes, which outstripped COGS (+92% q-q), and translated to 165% q-q augmentation in gross profit.

Higher nickel volumes propelled growth
In 4Q10, ferronickel sales volume increased 496% q-q to 7,287 tons, accounting for about 40% of full-year sales volume of 18,253 tons, compared to our estimate of 18,500 tons. Nickel ore sales were up 35% q-q to 1.8m wmt, forming 31% of full-year sales volume of 5.8m wmt. Gold sales volume, however, fell slightly by 4% q-q to 1,544kg. On the ASP front, ferronickel was down 2% q-q to USD22,156/ton (USD10.5/lb). However, gold price was up 13% q-q to USD1,387/toz. For the full year, the company achieved ferronickel production of 18,688 tons, up 49% y-y, while nickel ore volume reached 6.9m wmt (+21% y-y). Gold production, however, was up only 6% y-y to 2,780kg. Ferronickel ASP was up 49% y-y to USD22,156/ton (or USD10.05/lb) with gold up 26% y-y to USD1,228/kg. The strong growth in ferronickel volumes and ASP, translated into increased ferronickel revenues contribution from 41% to 50% in 2010. While gold’s contribution (excluding gold trading) fell from 17% to 14%.

Spill over effect = 11% increased 2011 earnings; Reiterate BUY
In 2011, there has been no change in guidelines given by the company. We retain 18,000 tons (-3% y-y) ferronickel production in 2011, 7.6m tons of nickel ores (+24% y-y), 4,007kg (+55% y-y) of gold, 200,000 tons (-67% y-y) of bauxite and 22,000 tons (-3% y-y) of silver. We also retain our gold price estimate at USD1,400/t.oz, before falling to USD1,250 in 2012 and USD1,100 from 2013 onwards. For 2011’s nickel price, we raise from USD23,200/ton to USD23,500, or USD10.7/lb versus USD9-10/lb ANTM’s guidance. In the short term, nickel prices could benefit from the uptrend in rising oil prices, and hence, leaving further upside to our numbers. However, over the longer run, we use a lower benchmark price of USD22,500 as nickel capacities from four new projects will apply price pressure as discussed in our previous report. In our model, as we input the un audited numbers into our model for 2010, and the spill over effect results in 11% increase in earnings for 2011, mainly resulting from lower cost estimates. Thus, we expect the company’s market underperformance (exhibit 5) to gradually improve. We retain our BUY rating on ANTM with TP of IDR3,000/share.