Banpu

Banpu Plc (BANPU) 

 

- 2Q15 faces loss due to decreasing coal price and sales  

BANPU posted net loss of B54m in 2Q15, versus a net profit of B69m in 1Q15, worse than expected because we had underestimated hedging loss. The net loss in 2Q15 resulted mainly from the coal business. BANPU’s mining business in Indonesia was affected by a 5%qoq decrease in average coal selling price and a 4.6%qoq decrease in coal sales volume, so gross margin decreased from 37% in 1Q15 to 32%. Meanwhile, the mining business in Australia was affected by an operation halt of Mandalong mine for longwall move, so gross margin decreased from 30% in 1Q15 to 24%. Overall, 1H15 net profit was B15m, falling 99.4%qoq and making up only 1.1% of our FY2015 forecast. 

- Profit to peak in 3Q15  

We maintain our FY2015 net profit forecast at B1.3bn, projecting 2H15 profit to grow notably from 1H15 and comprise 98.9% of the full-year forecast. We believe BANPU’s earnings would revert to profit again and make the year’s peak in 3Q15 from a high season of coal sales in Indonesia, a full-utilization rate of Australia mines after passing a shutdown in 2Q15, and recognition of shared profit from Hongsa coal-fired power plant phase 1 for the first full quarter; phase 2 of the project will start a commercial run in November 2015, which will help support BANPU’s profit in 4Q15. In addition, BLCP power plant will no longer undertake a maintenance shutdown in 4Q15. Overall, BANPU’s net profit is estimated to decline 49.8%yoy in FY2015, before reverting to a growth of 64.1%yoy in FY2016. 

- HOLD reiterated. Dividend yield expected at 4.3% p.a.

2015 fair value (DCF) is B26. We reiterate HOLD. Although the current coal price is likely already at the bottom and has a limited downside, there are no accelerators in the next three to six months. Moreover, listing of BANPU’s power plant, BPP (with a current production capacity of around 2,000 MW), in the SET would possibly happen in 1Q16.