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Apr 11,2017 15:05:35

Despite the recent strong share price outperformance, we believe Delta Dunia’s expected sharp improvement in financial performance has yet to be fully reflected in consensus numbers and its share price. We reinitiate coverage with a BUY call and DCF-derived TP of IDR1,500 (40% upside), which implies 2017F P/E of 10.1X on our projections. Our 2017F EPS is 21.8% higher than consensus. We like the stock given its undemanding valuations (2017F EV/EBITDA of 4x vs United Tractors’ 7.5x), improving ROAE, and strong projected 2017F earnings growth of 142% YoY.

  • 2017F earnings projected to surge 142% YoY but yet to be reflected in consensus. Delta Dunia Makmur ($DOID) is not well covered (consensus numbers reflect only one local broker) – this suggests that the projected sharp improvements in its 2017F operational and financial performance have yet to be reflected in consensus and its share price. We expect a sharp turnaround in Delta Dunia’s operational and financial performance in 2017F, as we project a 142% YoY increase in 2017F earnings on the back of a sizable increase in mining contracting volumes, and improvements in its coal mining contracting fees. Our 2017F EPS is currently 21.8% higher than consensus.
  • Spike in 2017F mining contracting volume. Delta Dunia owns 100% o fPT Bukit Makmur Mandiri Utama (Bukit Makmur), the second largest coal mining services contractor in Indonesia in terms of volume. We estimate its 2017F overburden removal volume and coal production to grow by 19.1% and 24.8% respectively. Volume growth in 2017F would mostly come from a ramp-up in coal production at Berau Coal ($BRAU), Sungai Danau Jaya (a subsidiary of Geo Energy Group, and Tadjahan Antang Mineral.
  • Stabilising coal price above USD70/tonne favours its mining fees. Most of Bukit Makmur’s mining contracting fees have three tiers, which are reviewed every month and determined based on the rolling average for coal prices over the last three months. Coal mining fees in the first tier (when average coal price <USD60/tonne) is 6% and 12% lower than second tier (when coal price is between USD65-75/tonne) and third tier (when coal price is >USD75/tonne) respectively. Due to weak coal prices, Delta Dunia’s mining fees were in the first tier (the cheapest) during 8M16. Its mining contracting fees moved up to the second tier in Aug 2016 and the third tier (the highest) since Sep 2016. As we project coal prices to sustain above USD70/tonne, we expect Delta Dunia to continue to enjoy higher profit margins from higher mining fees.
  • Reinitiating coverage with BUY and TP of IDR1,500. We reinitiate coverage on Delta Dunia with BUY as we think its upcoming sizable improvements in operational and financial performance are still not fully reflected in its share price. Our TP of IDR1,500 is derived using DCF (WACC: 9.8%, TG: 1%), and implies 2017F P/E of 10.1x and EV/EBITDA of 5x – this compares with United Tractors’ ($UNTR) FY17F P/E of 16.7x and EV/EBITDA of 7.5x. Near-term catalyst is a potential sharp upgrade in consensus earnings. Key risks to our call include a slump in coal prices. (Hariyanto Wijaya, CFA, CPA)
Jul 25,2016 21:46:01
Philippines’ coal demand to grow over 1 mln T/yr until 2020 – industry group

MANILA, July 21 (Reuters) – The Philippines’ coal consumption could grow by more than 1 million tonnes annually until 2020 as it expects to switch on more coal-fired power plants to support its economy, the head of a local industry group said on Thursday.

The Southeast Asian country’s consumption of the fossil fuel reached 22 million tonnes last year, and about 80 percent of that, or a record high 17.4 million tonnes, had to be imported almost entirely from Indonesia, the world’s top seller of thermal coal used in electricity generation.

Higher Philippine coal demand could be good news for Indonesia though it might be insufficient to move prices in an over-supplied market.

The Philippines relies heavily on coal imports as domestic supply, mainly from mine operated by Semirara Mining Corp , is not enough and the heat content is too low to be used in most of the country’s power plants. Imports in 2014 totalled 15.2 million tonnes, based on government data.

“We’re looking at an increment of 1 million tonnes per year until 2020,” Arnulfo Robles, executive director of the Philippine Chamber of Coal Mines, told reporters on the sidelines of a power industry forum.

“That’s a very conservative estimate,” he said. Robles welcomed Energy Secretary Alfonso Cusi’s policy statement earlier this month retaining coal as a core part of the country’s electricity generation mix while at the same time pushing aggressively for clean energy.

Robles downplayed the impact of an Indonesian ban on coal shipments to the Philippines, saying only small vessels have so far been stopped from delivering coal. Supply to the country’s power producers is delivered through large ships, he said.

Last month Indonesia said a halt on coal shipments to the Philippines would remain in place because of security concerns, after seven Indonesian sailors were kidnapped in the southern Philippines.

(Source : Adaro Blog, Reporting by Enrico dela Cruz; Editing by Christian Schmollinger)


Apr 22,2015 23:10:07
Nathaniel Rothschild is approaching Siberian Coal Energy Company, the fifth biggest coal mining company in the world, to counter Sinar Mas bid in acquiring 100% of Asia Resource, the parent company of Berau Coal Energy (BRAU). Rothschild, through its NR Holdings company, and SUEK will propose a cash offer for 100% of Asia Resource shares. Details regarding the cash offer, however, has yet come to light.