Perusahaan Batubara Bukit Asam; Expect stronger 2H earnings; Buy; Rp22,400; TP Rp25,750 prev Rp26,650; PTBA IJ - DBS Vickers

At a Glance
· 1Q11 earnings below expectations; earnings to pick-up in 2H

· Expect stronger 2H earnings with arrival of six new locomotives improving transportation capacity by 25% to 13.6m tons.

· Maintain Buy; TP trimmed slightly to Rp25,750 as we lowered our FY11-13F by 3.3-3.5%.


Comment on Results
Bukit Asam (PTBA) reported 1Q11 net profit of Rp760bn (+104%y-o-y). This made up 19% of our FY11F profit, but came in largely within expectation as we expect a stronger 2H.

We believe the lower 1Q results was due to lower than expected sales volume of only 3.1m tons (-6%y-o-y) versus our forecast of 3.8mn tons on lower coal trading combined with higher than expected production cost. 1Q11 blended ASP increased by 35%y-o-y to Rp753k/ton, in line with our estimates with more upside from the unpriced contracts for the export market.

Looking ahead, we expect sales volume to accelerate from 2Q onwards, underpinned by seasonally higher production and the arrival of six locomotive in the middle of this year which will increase transportation capacity by 25% to 13.6m tons.

Recommendation
We lower our FY11-13F earnings by 3.3-3.5% after imputing higher production cost. TP is marginally lowered to Rp25,750 after the earnings cut and as we rollover to FY12 valuation.