Bukit Asam (PTBA) prospect amid weakening coal prices

JAKARTA, APBI-ICMA: KONTAN.CO.ID June 10, 2019 reported that the weakening of coal prices depressed the performance of PT Bukit Asam (Persero) Tbk (PTBA). Analysts project this year's income of members of the Kompas100 index to not grow significantly.

In the first quarter of 2019, PTBA's revenue decreased 7.1% to Rp. 5.34 trillion from Rp. 5.75 trillion in the same period last year. On an annual basis, PTBA's net profit also fell 21.4% compared to the same period last year at Rp 1.45 trillion to Rp 1.14 trillion.

Andrew Franklin Hotama Analyst RHB Sekuritas said PTBA's performance was weakening because coal prices were also weakening. Quoting Bloomberg in the ICE New Coal trade contract in July 2019, coal prices are still in a downward trend at US $ 74.05 per metric ton per Friday (7/5). In comparison, the price of coal in the same period last year was at US $ 95 per metric ton.

"Still underweight for the coal sector and PTBA," Andrew said, Monday (10/5).

Furthermore, Andrew said coal prices were broken down due to the tension of the US and China trade war again heating up and making coal demand falling. Moreover, now China and other developed countries are trying to reduce the use of coal and switch to natural gas.

According to Andrew, the key to PTBA's performance being able to recover is when coal prices can also recover. "Indeed, the main sentiment is the price of coal itself," said Andrew.

If coal prices until the end of the year are still in a weakening trend, the performance of the coal sector issuers including PTBA will still be depressed. Andrew recommends a sell for PTBA with a price target that Andrew still calculates.


Increase Production

Meanwhile, Thomas Radityo Analyst Ciptadana Sekuritas Asia recommended a buy at a target price of IDR 4,150 per share. According to Thomas, the company's target to pursue coal production reached 6.1 million tons to 6.3 million tons in the second quarter of 2019, maintaining Thomas's projection for sales volume this year to reach 28 million tons.

"I maintain a buying recommendation with a lower price target because of the revised income from the previous Rp. 4,450 per share to Rp 4,150 per share," Thomas said in the research, May 28, 2019.

Thomas is also optimistic, although as of Monday (10/6) PTBA's stock price has fallen 31% at the beginning of the year at Rp 2,940 per share, there is still positive sentiment in favor of PTBA, including developing production and as long as China tries to prepare stock for winter.

Until the end of the year, Thomas projected PTBA to record revenue growth of Rp 21.21 trillion from last year's revenue of Rp 21.16 trillion.

In the research of Frederick Daniel Resilient Analyst of PT Indo Premier Securities, April 25, 2019, said PTBA will increase its capacity to reach 30 million tons per year in 2020. "New mining lines with a capacity of 30 million tons in Tanjung Enim-Tarahan," said Frederick.

Until the end of the year, Frederick recommended buying a target price of IDR 4,600 per share.

"11% upside potential, we maintain PTBA's estimated income of Rp 5.06 trillion this year because we believe PTBA can increase sales volume higher at 28.3 million tons or up 14% yoy," Frederick said.




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