Bukit Asam: Expect stronger earnings in 2H (Buy; Rp20,900; TP Rp24,600; PTBA IJ) - DBS

At a Glance
 2Q11 net profit came below expectations on lower sales volume
 Expect earnings to pick up in 2H driven by seasonally higher production and higher capacity
 Maintain Buy, TP lowered to Rp24,600 as we cut our FY11-13F earnings estimates by 3-7%.

Comment on Results
Bukit Asam (PTBA) reported 1H11 net profit of Rp1.6tn, which made up only 40% of our FY11F of Rp3.9tn. We suspect the lower than expected results was due to delay in delivery of locomotive and wagon as railway capacity expansion took longer than
expected. In addition, weaker coal trading did not help. PTBA sold 6.5m tons of coal in 1H11, up by only 2% yoy while its coal trading was 0.33m tons (vs our FY11 forecast of 1m tons).

However, poor sales volume was somewhat offset by higher blended ASP of Rp783k/share (US$91/ton) up by 41% yoy driven by strong export price of US$98.8/ton (+62%yoy) and domestic prices of Rp760k (+27%yoy).

We expect stronger earnings in 2H driven by seasonally higher production and higher capacity, as the delivery of its locomotive and wagon will increase its transportation capacity by 25% to 13.6m tons.

Recommendation
We have lowered our FY11-13F earnings estimates by 3-7% after imputing 5-6% lower volume to 15.5m/18m/20m tons respectively and 1-3% higher ASP. TP is lowered to Rp24,600 based on blended valuation of 15x FY12F PE and 5.0x P/BV. Current valuation remains undemanding. Maintain Buy for its 18% upside potential despite
lowering our estimates.