Corporate Result Flash Timah - Bahana

4Q10 performance
§ TINS booked 4Q10 earnings growth of 208% q-q to IDR473b, bringing full-year earnings to IDR948b (+202% y-y), in line with our forecast but 24% higher than consensus estimate. The strong full-year results stemmed from higher tin prices which averaged USD19,500/ton (+44% y-y), although tin sales volumes fell 18% y-y to 40,302 tons on the back lower production (-10% y-y) impacted by heavy rainfalls.
§ 4Q10 top line grew 46% q-q to IDR2.7t due to higher ASP while COGS were only up 13.5% q-q, translating to 220% q-q growth in gross profit.
§ Operating expenses were up 195% q-q, bringing operating profit to IDR687b (+229% q-q), 19% below ours but 7% above consensus’.

Outlook
We apply TIN price of USD24,000/ton (+23% y-y) and production of 48,000 tons (inline with managements guidance) resulting in 2011 net profit of IDR1.4t, +48% y-y, the highest in the metal sector. The downside risk to our forecast is that TINS exports the majority of its product to Japan for electronic use, and cancellations of orders would adversely impact TINS sales volumes unless the company can divert its sales to other markets.

Recommendation and valuation
We will review our production forecasts for 2011 after talking with the management as well as our ASP as the current spot tin prices are much higher at USD31,249/ton. At this stage, our DCF-based TP is at IDR3,150/sh. With 21% upside potential, we retain our BUY rating on TINS.