Banpu

Banpu Plc (BANPU)

- 2Q13 profit to weaken 6.8%qoq due to Fx loss

We estimate 2Q13 net profit of BANPU at B862m, decreasing 6.8%qoq mainly as
a result of a Fx loss from AUD weakness against USD (because Centennial
possessed a USD debt of around US$300m). The AUD depreciation in 2Q13 also
caused a loss from forward hedging. Excluding the extraordinary items, norm
profit would jump as much as 265.8%qoq to B1.8bn, thanking to the following
contributions. 1) Coal sales volume in Australia would increase 35.7%qoq to 3.8
million tons because Mandalong mine could resume its full operation after a
longwall move in 1Q13, which made average cost of the Centennial mine
decrease 15.5%qoq to US$49/ton. As a result, earnings performance of the mine
reversed from a net loss in 1Q13 to a net profit in 2Q13. 2) The company would
book a higher share of profit from BLCP (BANPU holds 50% stake) as a result of a
seasonal effect (EGAT usually orders BLCP power plant to operate at a full
capacity during summer) and a Fx gain from the appreciation of USD as BANPU
booked Dollar as a functional currency and BLCP also possesses a USD debt of
US$350m. 3) The company would recognize higher share of profit from a power
plant in China because of decreasing cost of raw material, coal. 1H13 profit of the
power plant in China equated to B450m, equal to that in FY2012. However, a
negative factor in 2Q13 is average coal sale price in Indonesia that is projected to
drop US$3/ton from 1Q13 to US$77/ton following a continuous decrease of BJI,
while coal sale volume would stay flat at 7 million tons. Overall, 1H13 net profit is
estimated at B1.78bn, down 64% from the same period last year and comprising
only 28% of our FY2013 forecast.
- Cut 2013-2014 forecast to reflect lower coal selling price
We slash our profit forecast for 2013-2014, as detailed in the table below, in
order to reflect average coal sale price that is anticipated to decrease beyond
previously projected. We decrease an assumption for average selling price of coal
in Indonesian mine from US$80/ton to US$77/ton for 2013 and from US$85/ton
to US$80/ton for 2014 to mirror the BJI that has dropped to US$77/ton.
Moreover, coal purchasing contract in 2H13 for coal product in 2014 would
decrease following the BJ. However, we project norm profit in 2H13 to stabilize at
a high level like in 2Q13 because selling volume would increase around 1 million
tons while a decrease in production cost by US$3/ton to US$48/ton would
compensate for a projected decrease in coal selling price of US$1-3/ton to
US$74-76/ton.
- New 2013 fair value is B352.57. Hold
Under the new forecast, 2013 fair value, DCF, is B352.57/share (from B420.86).
We recommend only HOLD because in the next 1-3 months there would not be
new positive factors. Although the share price has likely already undergone
substantial correction to reflect negative factors of the industry, the coal price will
not improve like in the past 1-2 months. We also cut our dividend payment
projection for FY2013 from 18/share to B10/share, according to the company’s
policy to keep the dividend yield at only 4% p.a.