Aneka Tambang: HOLD; Rp2,125; TP Rp2,500; ANTM IJ To pay Rp70.71/share final dividend - DBS

Aneka Tambang (ANTM) has received shareholders approval to pay final dividend of Rp673bn or Rp70.71/share, yielding 3.3%. This translates into 40% payout ratio from FY10 net profit of Rp1.7tn. Meanwhile, ANTM is looking for financing for its US$1.6bn FeNi Halmahera projects (including power plant). PT PLN plans to spend US$600m to build a 250MW power plant to supply power for the smelter while ANTM plans to spend US$1bn for the new FeNi smelter with total capacity of 27,000tpa. Assuming 60-65% to be funded by debt, ANTM needs to raise US$600-650m in loans. The project is estimated to be completed in 2014-15. Once completed, ANTM’s FeNi capacity will double to 53,000tpa from 26,000tpa.

We maintain Hold, TP Rp2,500 based on blended valuation of DCF (12% WACC. 3% terminal growth), 14.0x FY11 PE, and 6.5x EV/EBITDA (5-years average). ANTM is trading at 12x FY11 PE against regional peers’ average of 10x. We like ANTM for its attractive long-term growth prospects through several planned projects but execution is the key risk. Short-term earnings growth will depend on prices for both nickel and gold as we don’t expect capacity expansion in the near term.