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Good morning,
Harum Energy –
Strong Earnings To Continue
Harum Energy booked
strong 2Q17 earnings – 6M17 earnings were above consensus but lower than our
expectations (66%/45% of consensus/our FY17 expectations). Management states
that Santan Batubara, Karya Usaha Pertiwi and Tambang Batubara Harum would
commence coal production in 2018, which we estimate should add around 2.4m
tonnes of coal to consolidated coal production. We fine-tune our assumptions
and reiterate our BUY call with DCF-derived TP of IDR2,800 (from IDR3,000,
27% upside), implying FY18 P/E of 10.0x.
¨ Strong
earnings continue.
Harum Energy booked strong 2Q17 earnings of USD10m (+224.8% YoY, -19.3% QoQ)
on the back of a combination of higher volume and higher coal selling price,
which were partially offset by higher stripping ratio. Its 6M17 earnings were
higher than consensus but lower than our expectations (66%/45% of
consensus/our FY17 expectations).
¨ Bulk
of 3Q17 coal sales already locked in. Harum Energy stated that it has already
sold and priced most of its 3Q17 production at similar terms to 2Q17.
Therefore, we estimate that its third quarter earnings would be relatively
similar to its second quarter earnings.
¨ Subsidiaries
to commence coal production next year. Management stated that they expect
associate company, Santan Batubara (SB), and its subsidiaries, Karya Usaha
Pertiwi (KUP) and Tambang Batubara Harum (TBH), to commence coal production
in 2018. We estimate that the subsidiaries and associate company would add
around 2.4m tonnes of coal production in 2018 to consolidated coal production.
¨ Clean
balance sheet with sizable net cash position. Harum Energy has
maintained a clean balance sheet with zero debt. Its net cash position has
expanded to USD247m in June, from USD231m at end-2016. Low capex requirement
due to the absence of inorganic expansion in the pipeline should underpin its
sizable free cash flows.
¨ Diversified
coal sales destinations. Its coal sales destinations are well diversified. As
of 6M17, Malaysia (30%) was its main coal sales destination, followed by
South Korea (27%), Taiwan (16%), China (9%), India (7%), Thailand (5%),
Philippines (3%) and Japan (3%).
¨ Reiterate
BUY call with revised DCF-derived TP of IDR2,800. We fine-tuned our
assumptions to adjust for the lower-than-expected earnings, resulting in our
FY17-18 earnings forecasts being adjusted by -12% and -8% respectively. Our
TP assumes WACC of 12.0% and zero LTG, and implies FY18 P/E of 10.0x.
Risks to our call include a significant
drop in coal prices, weaker-than-expected coal demand, a significant increase
in oil prices, and delays in commencing coal production at the subsidiaries
and associate company. (Hariyanto Wijaya,
CFA, CPA, CMT)
Link
to report: Harum Energy : Strong Earnings To Continue
Link
to daily report: Indonesia Morning Cuppa 020817
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Economics Update:
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July Inflation Eases Off After Aidilfitri
Festivities
Headline inflation eased to
3.9% YoY in June (+4.4% in June), attributed mainly to slower increases in
the price of almost all products & services after the Aidilfitri
festivities. For the full year, we forecast headline inflation to pick up to
4.2% in 2017, from +3.5% last year, on account of:
1. Higher energy prices in 1H17 as a result of
elevated crude oil prices;
2. Electricity tariff hikes;
3. Modest pick-up in volatile food prices.
¨ Key policy rate to
be maintained. As
inflation would likely continue to be manageable, we expect Bank Indonesia
(BI) to keep its monetary and macro-prudential policies stable.
¨ Raw food was the
biggest contributor
to lower inflation in June. This was due to the price normalisation after Aidilfitri
festivities, which was led by price decreases in
some items such as garlic and chicken.
¨ Housing
& utility price inflation moderated in July, as upward
price pressure eased during the month in the absence of electricity tariff
hikes for both post-paid and pre-paid customers, which were carried out in
May and June respectively.
¨ A
moderation in transport, clothing and health inflation also helped. This
was led by a slowdown in price increases in some items such as land transport and
gold jewelries.
¨ Processed food
prices and cost of education held up. Meanwhile, price inflation in education
and processed food, beverage & tobacco remained
stable during the month.
¨ Core
consumer price index (CPI), meanwhile, stabilised at 3.1% YoY in July, the
same pace as in the previous month, amid a stable currency and steady
domestic demand. (Rizki Fajar)
Link
to report to be sent out later
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Media Highlights:
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Corporate
Two economic zones
to operate in late August
Indofood looks to
add its production capacity
Agung Podomoro
starts to market Orchard View
Bekasi Fajar targets
IDR1trn industrial land sales in 2H17
Waskita Karya lends
IDR560bn to Waskita Toll Road
Link Net posts 28,5%
increase in net profit in 1H17
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Our
Recent Publication:
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Results Review: Bumi Serpong Damai – Expect Its
Performance To Stay Level In 2H17
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Results Review: XL Axiata – Upbeat On Better Data Monetisation
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Results Review: Unilever Indonesia – Solid Earnings
Growth Likely To Continue
Link to report: Unilever
Indonesia : Solid Earnings Growth Likely To Continue
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Results Review: Alam Sutera – Positive Surprise
Following a Weak 1Q17
Link to report: Alam
Sutera : Positive Surprise Following a Weak 1Q17
|
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Results Review: Intiland Development – All Priced In
Link to report: Intiland
Development : All Priced In
|
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Results Review: Pembangunan Perumahan Persero –
Positive Outlook Ahead
Link to report: Pembangunan
Perumahan Persero : Positive Outlook Ahead
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Results Review: Bukit Asam – More Realistic Guidance
Link to report: Bukit
Asam : More Realistic Guidance
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Results Review: Japfa Comfeed Indonesia – Margin
Erosion Faster Than Expected
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Results Review: Indofood CBP – Expecting Better
Quarters Ahead
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Results Review: Indofood Sukses Makmur –
Earnings Growth To Accelerate In The Quarters Ahead
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Best regards,
Helmy Kristanto
Director
Head of Indonesia Research
PT RHB Sekuritas Indonesia
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