BANPU

Banpu Plc (BANPU)
Q3 2012 profit weaken 17.3%qoq as projected as pressured from falling selling price
BANPU reported net profit in 3Q12 at B2.26bn, falling 17.3%qoq as we have
projected. The decline came mainly from a weakness of coal selling price by
15.2%qoq on average to US$79.74/ton as a result of a decline in average
selling price of coal in Indonesia by 6.4%qoq to US$88.05/ton and in
Australia by 16.3%qoq to US$68.56/ton, along with BJI index that has
dropped continuously during the past 3-6 months. At the same time, overall
production volume in 3Q12 has grown by 11.8%qoq to stand at 10.85 million
tons, mainly from the growth of coal sales in Australia from 2.9 million tons
to 4.23 million tons while coal sales in Indonesia decreased from 6.8 million
tons to 6.62 million tons. Moreover, profit in 3Q12 was depressed by a
decrease in extraordinary profit from hedging by 50%qoq to only B531m.
Overall, net profit in 9M12 was B7.78bn, falling more than 52.9% from the
same period last year and comprising 66% of our FY2012’s earnings forecast.


Revise down 2012-13’s forecast…4Q12’s profit to hit
year’s record low
We cut our profit forecast for FY2012-2013. For 2012, we decrease our
assumption for coal sales in Indonesia from 27 million tons to 26 million tons
but maintain average selling price at US$90/ton. For 2013, we reduce
average selling price to US$85/ton from US$90/ton in order to reflect the
current BJI Index that has dropped to US$85-90/ton on average. Normally,
coal selling price of BANPU has a discount from BJI Index by 10-15%.
Moreover, at present BANPU has made a contract for the sales volume and
selling price of coal by 50% of the total sales in 2013; 15% of which would
be the fixed selling price at US$80-90/ton while the other 35% would be the
Index link. Consequently, the new net profit forecast for FY2012-2013 will
decrease by 19% and 24%, respectively, from the current forecast, as shown
in the table. However, the profit in 4Q12 is projected to hit the year’s record
low due to the selling price of coal that has declined continuously from 3Q12
and the profit sharing from investment in BLCP’s power plant (BANPU holds
50% stake) that would fall significantly from 3Q12 due to the 1-month
annual maintenance shutdown.


HOLD…no supportive factors in next 1-3 months
Under the new forecast, 2013’s fair value (DCF) is B515.27/share. We
reiterate our recommendation of “HOLD” since there would be no supportive
factors in the next 1-3 months. Nevertheless, we’re convinced that the share
price that has dropped has already reflected negative factors at some level.
Moreover, according to fundamentals, the overall look of the coal industry
has limited downside because the current coal price has already got near the
cost of coal producers in many countries such as the US, Russia, and
Australia so the supply might decrease because it won’t worth the cost of
production. Accordingly, the recovery of coal price might be seen in 2013.