Buy PTBA on In-line Domestic ASP & FY10! - Credit Suisse

BUKIT ASAM (PTBA): In-line FY2010 & Suralaya Domestic ASP Rp815k ($90.5/t CIF)!
CS is bullish with Thermal coal, assuming average benchmark price of US$120/t in
2011F and US$130/t in 2012F, compared to NEWC weekly spot FOB US$130.3/tonne as of March 4th. PTBA stock price chart (attached) is attractive, given mid-long term expansion programmes (PTKA railway, Rajawali Railway, Mine-mouth IPP projects despite scaled-down, and Adani railway). At Rp20,550- PTBA is trading on 13.1x 2011F PER on the back of 79% EPS Growth and 37% upside to TP Rp28,200 (based on 18x 2011F PER), we reit BUY PTBA!

· Fonny Surya/Paworamon (Poom) Suvarnatemee, CFA (Daily attached): PTBA settled its domestic pricing with Indo Power (Suralaya) at Rp815,000/t for 2011 (~US$90.6 CIF), about +19% YoY and 5% above our expectation. Including other domestic contracts (Figure 1), the overall domestic ASP rose 26% YoY, in line with our expectation. We reiterate that despite being a state-owned company, PTBA’s relationship with PLN is business to business and price negotiation is on a fair market pricing.

· PTBA also reported FY10 earnings of Rp2,009 tn, in line with consensus and our expectations, about +28.5% QoQ and -26.4% YoY. The strong QoQ performance was attributed to lower costs of production, sales and marketing, as well as lower effective tax rate. We retain our forecasts as we await the full audited results.

· We maintain our OUTPERFORM rating on the back of positive pricing results, improving cost management and growth from railway expansion. We maintain our target price of Rp28,200, based on 18x 2011E P/E (14.5x P/E).