Company Research 131211 ADRO

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Company Research 131211 ADRO Powered By Docstoc
					Company Fundamental Research, 13 December 2011

                               PT. Adaro Energy Tbk.
                               Focus on expansion

   Potential           stock   Company Overview:
   fair price:
   Rp. 2,500 (20% YoY)         Adaro Energy and its subsidiaries currently deal in coal mining and trade, coal
                               infrastructure and logistics, and mining contractor service. The entire production
                               process is handled by its subsidiaries like Alam Tri Abadi (mining license holder),
   Std. Dev: 2.23%
                               Sapta Indra Sejati (mining contractor), Orchard Maritime Line (coal barging and
   Beta vs. JCI: 1.201         loading), Indonesia Bulk Terminal (coal storage), and Coaltrade (coal marketing).
                               Each operating subsidiary is positioned as an independent and integrated profit
   Stock code: ADRO
                                                                                             production and a coal
                               centre so that Adaro Energy has competitive and reliable coal p
   Reuters: ADRO:JK            supply chain that produces optimum shareholder value. In the future, Adaro Energy
                               may publicly list the strong performing subsidiaries to support further growth and
   Bloomberg: ADRO:IJ
   Priced on 12 December
   2011, JCX: Rp 1,940

   Market Cap (Millions)


   Shares (Millions)

   Stock performance:

                               As an Indonesia’s second largest thermal coal producer, Adaro recorded production
                               volume in amount of 42,2 million tons by 2010 and projected this year production
                               volume can reach 46 48 million tons. In terms of market share, among the other
                                                                                                  market share of
                               global thermal coal exporter, Adaro is placed in the 4th rank with mar
                               4,7% and placed in the first rank for domestic markets with the percentage of
Company Fundamental Research, 13 December 2011

                            3Q-2011 Company’s performance
                            Biggest sales growth within its sector,

                            PT Adaro Energy Tbk (ADRO) recorded a net profit in the third quarter of 2011
                            amounting to USD 376 million, up 96.5% to prior year period USD191 million

                            Adaro production also recorded increased 10.8% to 35.28 million tons, and sales
                            also rose 18.4 % to 38.33 million tons.

                            Below, it is projected that at the end of year 2011, Adaro’s sales are forecasted to
                            be increase as much as 39% YoY. It may sounds too much, nevertheless, along this
                            year Adaro’s coal sales have improved by 19% if it’s compared with last year sales
                            (9 months comparison between 2011 & 2010), while the price o thermal coal has
                            increased by 25% YoY. Furthermore, for the year 2012 ahead, Adaro Itself has
                            made their projected revenue to be increase as much as 1010-15% YoY.

                             Account name              2009            2010            2011F          2012F

                             Revenue                   26,938,020      24,689,333      34,364,168     41,181,889

                             COGS                      15,900,123      16,957,291      22,545,184     27,018,063

                             Gross Profit              11,037,897      7,732,042       11,818,984     14,163,826

                             Operating Expenses        1,109,450       957,764         1,115,483      1,336,791

                             Operating Income          9,928,447       6,774,278       10,703,501     12,827,035

                             Other income (expenses)   1,350,066       1,724,360       2,897,773      3,472,680

                             Profit before tax         8,578,381       5,049,918       7,805,728      9,354,355

                             tax expenses              4,119,101       2,668,668       3,335,835      4,169,794

                             Net Income                4,459,280       2,381,250       4,469,893      5,184,561

                             Ordinary Activity         92,028          173,937         76,597         88,844

                             Net Income                4,367,252       2,207,313       4,393,296      5,095,717

                             EPS                       137             69              137            159

                            (Stated in Millions IDR)
Company Fundamental Research, 13 December 2011

                                                  Historical sales along with 2011F & 2012F
                                         20,000,000                                                           Sales Revenue (in
                                         10,000,000                                                           millions IDR)
                                                              2008     2009    2010     2011F     2012F

                            Balance sheet performance
                            Growing Assets, Above Fair Leverage, Stable Equity

                                                        ADRO Financial Position (in millions IDR)
                               Millions IDR

                                                                     2009        2010             2011F        2012F         2013F
                                              Total Assets        42,360,347   40,600,921       53,667,659   61,189,150    69,764,773
                                              Total Liabilities   24,848,413   21,970,369       30,779,645   35,093,394    40,011,712
                                              Total Equity        17,444,891   18,576,441       22,888,015   26,095,756    29,753,061

                            Adaro Energy's debt ratio increased in 2011 ahead due to the rising number of non-
                            current debt The value of bank debt of U.S. $ 676.23 million in the second quarter
                            2011 increase to U.S. $ 1.02 billion in the third quarter of this year. Bank debt which
                            is a credit facility to be used by ADRO to finance its capital expenditure, increased
                            from U.S. $ 93.67 million in the second quarter to U.S. $ 414.17 million in the third
                            quarter. Furthermore, internal source of ADRO said that they still hold the credit
                                          750-850 Million from Banks of which they haven’t retrieve. Therefore, for
                            facility US$ 750                                        haven
                            the next 1 2 years ahead, ADRO’s debt ratio might still possibly increase (higher
Company Fundamental Research, 13 December 2011

                               2012 Coal price preview
                               Thermal coal prices are projected relatively stable despite the threat of a global
                               economic slowdown. A dropping price lately is not expected to lead to a sharp fall
                               that occurs as a result of the crisis in 2008.

                               The high inventory levels due to increased private electrical contractor (independent
                               power producer / IPP) in China might be an encouraging factor of why coal price &
                               demand will not sharply decrease for 2012. For Adaro specifically, domestic
                               demand might rise as well, due to some of PLN power p       plant are using coals for

                               Below, shows the 5 years historical coal price from the Australian thermal coal price
   Based on the estimate
   of     six     analysts
   surveyed             by
   Bloomberg, the price of
   coal        benchmark
   contract     on     the
   exchange              of
   Newcastle, Australia in
   2012 is predicted to
   around U.S. $ 118 per
   ton, down 3.2% from
   the average price this
   year reached U.S. $
   122 per ton
                               Source: australian&months=60

                               Adaro’s Geographical sales segment:
   While          European
   countries might drop
   their level of coal
   imports worldwide due
   to    the      European
   financial crisis, ADRO
   might not too concern
   about this issue, for the
   case that the ADRO
   geographical       sales
   segment, most of the
   coal buyers, are from
   local area, and Asian
   countries     such     as
   China and India.
Company Fundamental Research, 13 December 2011

                            BUILD FOR THE FUTURE
                               •   Acquisition of subsidiaries
                                   Adaro’s coal mine begin to expand outside from their main area at South
                                   Kalimantan, to South Sumatera. 3 mining companies of which Adaro
                                   become a major shareholders at South Sumate are:

                                      1. PT. Bukit Enim Energy
                                         PT Alam Tri Abadi, subsidiaries of PT Adaro Energy, acquires 46%
                                         shares of BEE for US$ 46 Million from Lucky Star Corporation.
                                      2. PT. Servo Meda Sejahtera
                                         PT Adaro Energy acquires 35% shares in PT Servo Meda Sejahtera
                                         for Rp 200 billion from PT Servo Infrastruktur.
                                      3. PT. Mustika Indah Permai
                                         PT Adaro Energy, through unit Alam Tri Abadi, acquired 75% shares
                                         in PT Mustika Indah Permai from Elite Rich Investment Limited. The
                                         transaction is worth US$ 222.5 million.
                                         Furthermore, it is predicted with this acquisition, it will allow Adaro
                                         Energy to increase its production capacity to 80 million tons in
                                         several years to come.

                            Below, the table shows how much coal reserves that PT Adaro Energy has at 2010,
                            with their coal mines at South Kalimantan.

                            Together with these acquisition & coal mine expansion at South Sumatra, Adaro
                            estimates the total coal reserves will equal to 10.3 billion tons in 2012, from 4.6
                            million tons currently owned (October 2011).
Company Fundamental Research, 13 December 2011

                            To be summarized, here lies the summary of the fair projection price of ADRO
                            at 2011F, along with the 5 years stock price projection based on the
                            assumption of the improvement of their 3Q 2011 & business expansion plan pla

                             Summary             2010        2011       2012       2013       2014       2015

                             EPS                   69.00     137.35     159.32     190.92     228.80     274.20

                             PER                   28.55      15.69      18.35      18.16      17.21      16.13

                             PBV                    3.39        3.01      3.09       3.11       3.10       3.05

                             Fair Price          2,155.46   2,519.86   2,892.64   3,285.34   3,691.62   4,101.93

                             Deviation             2.23%
Company Fundamental Research, 13 December 2011

                              Mining              Sector       Companies            fundamental

                                                    ITMG       PTBA       ADRO      BUMI      HRUM

   2nd Biggest sales growth
   by Adaro
                              Sales Growth          33.79%     31.40%     42.77%    -10.95%   61.48%

                              Net Profit Margin     0.22       0.3        0.13      0.08      0.21
   Adaro has the biggest
   market cap within its
   sector.                    Market Cap            44971 B    39631 B    62373 B   43105 B   19170 B

                              EPS                   3764.48x   1344.00x   138.35x   132.59x   533.61x

   Slightly overpriced
   based on PER               PER                   10.57x     12.80x     14.10x    15.65x    13.31x

                              PBV                   5.19x      4.83x      2.92x     3.48x     5.66x

                              ROA                   32.14%     29.27%     9.17%     4.21%     34.52%

   ADRO maintain its          ROE                   49.05%     37.78%     20.67%    22.97%    42.53%
   expansion by using
   Bank debts, not entirely
   internal cash (higher
   debt)                      DER                   0.00       0.00       0.86      3.08      0.00
   Smallest EV/EBITDA,
   ADRO prove to be better
   in the terms of earning.   EV/EBITDA             9.27       11.76      8.02      10.07     11.05
Company Fundamental Research, 13 December 2011

                            TECHNICAL ANALYSIS

                            Based on the 2 Indicators from the charts above, ADRO currently stay at the
                            overbought position. Stochastic indicator (short term indicator) show some death
                            cross while MACD indicator seems to look flat after it failed to make a golden cross
                            in order to show some bullish moment for a couple of days ahead (long term
                                       .               t
                            indicator). From the chart pattern, ADRO was formed a double top pattern at 2150,
                            which make this level, the strongest area for resistance. 2000 is the psychological
                            area for investors, which can be said that if the body of a candlestick breaks this
                            level in the near time, it may try to break the resistance level at 2150, and possibly
                            goes all the way to the fundamental value at 2500. Suggestion: hold this stock for a
                            possible value at 2500.
Company Fundamental Research, 13 December 2011

                                                                   Research Team :
                                                                 Equity Research Team


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                                     PT. Asjaya Indosurya Securities does not give any warranty in relation to the accuracy, completeness and
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