Adaro Enery: Key takeaways from conference call (ADRO, Rp2,350, Buy, TP: Rp2,800) - Mandiri

􀂄 With available rich cash funding of US$1.2bn, Adaro aims 2-3 coal asset acquisitions this year. Adaro is also eyeing downstream energy business by participating tender of 2 x 1,000 MW coal fired power plant in Pemalang, Central Java.
􀂄 Adaro now expects that 80Mt coal target in 2014 might be achieved with combination both organic and inorganic growth.
􀂄 Adaro’s FY11F pricing status is: 35-40% index linked, 5-10% spot market and the remainders are fixed price. In term of pricing Adaro has made a better pricing strategy compare to previous years. But we still see some lagging on its pricing
􀂄 Adaro’s confident with the robust of Wara coal demand from India and local market, therefore Adaro does not blend it with Tutupan coal.
􀂄 Adaro also sees minimal impact from Japan’s disaster since the affected area only contributed around 0.5Mt demand in last year.
􀂄 Adaro’s dividend payout ratio will be 45% for FY10 net profit, translating into total final cash dividend for 2010 around Rp678bn or Rp31/share implying dividend yield of 1.3%, including an interim cash dividend of Rp9.85/share paid on 10 December 2010. So we expect the remainders around Rp21/share will be paid. The Annual General Meeting of Shareholders will be held on 20 April 2011.
􀂄 Currently we have buy rating on ADRO. ADRO is traded at 15.0x PER11F