INVESTOR DIGEST Equity Research | 24 February 2011 KIJA to sign 20 years power plant agreement with PLN today; ITMG : Disappointing FY10 results, 33.7% below consensus - Mandiri Sekuritas

Bekasi Kawasan Jababeka: KIJA to sign 20 years power plant agreement with PLN today (KIJA, Rp104, Buy, TP: Rp133)
 Bekasi Power (BP), a subsidiary of Kawasan Jababeka (KIJA), has finally announced the signing plan of Joint-Operation Agreement (JO/KSO Jual Beli) with PLN with regards to the long waited power plant plant, which is scheduled today. The JO will have a tenor of 20 years.
 PLN will be the 100% off-taker of the 130MW gas fired power plant capacity. In the mean time, BP will have an option to buy back electricity from PLN to ensure supply to the industrial tenants within Jababeka Industrial Estate. Scheduled COD of the power plant is Dec11.
 The power plant deal with PLN is the main catalyst for KIJA that people has been expecting since early of 2010. The sales pricing is indicated to be ±9 cents/kwh. KIJA would potentially obtain some US$80mn of annual power revenues (with 35% EBITDA margin), which expected to contribute 75% of total revenue onwards. Our 2011F valuation stands KIJA at Rp455/share. We call Buy with TP Rp133/share that we may revise higher, reducing discount that we put earlier due to the lingering deal. The stock currently trades at a very attractive 77% discount to our RNAV11F and PE11F 6.1x.

Indotambang : Disappointing FY10 results, 33.7% below consensus (ITMG, Rp48,600, Neutral, TP: Rp53,800)
 Despite FY10 expectation of production of 22Mt (Q4 : 5.6Mt), with Q4 higher than average quarterly production for the 3 quarters in 9M10 of 5.5Mt, quarterly net profit fell 73.8% qoq. Operating profit was 17.7% below consensus of US$440.7mn. Mining cost and cost of dispatch and demurrage were seen as the main reason (below table). We are looking to see whether this is a one-off event or pattern to continue in 2011. At Rp48,600, ITMG is trading at FY11F and FY12F PER of 13.1x, and 10.9x, respectively.