Sent from my computer of course! -----Original Message----- From: dani...@aaasecurities.com Date: Wed, 11 Nov 2009 10:00:01 Subject: Fw: Macquarie Research: Regional Coal - Warming up to Indonesia
Sent from my BlackBerry® powered by Sinyal Kuat INDOSAT -----Original Message----- From: "Mona Nizar" <mona.ni...@aaasecurities.com> Date: Wed, 11 Nov 2009 16:55:51 To: Mona Nizar<mona.ni...@aaasecurities.com> Subject: FW: Macquarie Research: Regional Coal - Warming up to Indonesia Regional coal Warming up to Indonesia Preference for Indonesia over China; still love coking Chinese coal stocks have outperformed their Asean peers in recent months (in line with our thesis) by roughly 30-50%. Whilst we still like the Chinese, we prefer Indonesia thermal stocks on the back of this underperformance and improving global fundamentals. We therefore: * Upgrade United Tractors to Outperform, and Bumi and Indika to Neutral. * Reiterate our Outperform call on ITMG/Banpu, SAR, China Shenhua & China Coal. We continue to love coking coal and our preferred direct plays are Fushan Energy and Gujarat, and indirect plays are BHP, Xstrata and Mitsubishi. Fundamentals improving in Asean thermal coal We see the Asean thermal coal stocks set for out-performance as: 1. Supply/demand tighten into the medium term as Chinese, Indonesian and Indian import demand could accelerate from 2010-2012, which could lead to consensus price upgrades into the medium term. 2. Limited downside given prices are trading around the US$70/t cost curve. 3. Sector attractively valued with Banpu, ITMG, SAR, and Bumi trading below our DCF fair value and the sector trading on approximately 11x in 2011 (assuming US80/t forecast). Should we see supply demand fundamentals tighten materially, we could see the potential for the sector to trade at a significant premium to DCF fair values (like in prior bull cycles) Indonesian coal - Buy Banpu, ITMG, SAR and UNTR We think that Indonesia coal will continue to take seaborne market share due to its ability to increase production, low cost structure and short transportation distances to key markets. Our preferred producers are Banpu, ITMG, SAR but we also like the coal contractors, including UNTR. While Bumi is one of the most leveraged stocks to the coal cycle, we await clarity on its acquisition strategy before turning positive. We like the long-term ADRO production growth story, but it appears overvalued and expectations are too high. We upgrade UNTR from Neutral to Outperform and raise our price target from Rp14,500 to Rp18,000. We have revised upward our forecast outlook on heavy equipment volumes, overburden removal, and high sustainable margins due to attractive industry conditions and benign competition. Shenhua, China coal and Fushan are our preferred plays We continue to like the thermal coal stocks in China given the improving pricing outlook, strong volume growth, and reasonable valuations (versus coking coal stocks). Top picks include China Shenhua and China Coal Energy. We raise our target price for Fushan International Energy to HK$7.60 after factoring in the acquisition of mines in Inner Mongolia and stake in Mount Gibson Iron Ore, and maintain our Outperform recommendation. We upgrade Yanzhou Coal from Underperform to Neutral and raise our target price to HK$13. This e-mail is confidential and intended only for the use of the individual or entity named above and may contain information that is priviledged. If you are not the intended recipient, you are notified that any dissemination, distribution or copying of this e-mail is strictly prohibited. You may from time to time be provided with investment and financial related information and reports, including but not limited to, research reports and market or securities specific analysis. Please note that the information is provided to you for information only. All of the information report and analysis made should be taken as having been prepared for the purpose of general circulation and without regard to any specific investment objective, financial situation or the needs of any particular person who may receive the information, report or analysis (including yourself). Any recommendation or advice that may be expressed in or inferred from such information, reports or analysis therefore does not take into account and may not be suitable for your investment objectives, financial situation and particular needs ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~ Message has scanned by AAAS Mail Security Gateway ~~~ ~~~ No virus found in this incoming message ~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
