12-Month Price Target : Rp 9,300/shr
Booked net income growth in 2010
Harum Energy had been able to book net income growth in 2010
despite extremely bad weather that coal producers had to encounter
last year. Net income grew 7.4% from Rp767 billion to
Rp824 billion. The bottom line of 2010 was below our expectation
of Rp880 billion in 2010. HRUM’s revenue decreased 2.5% from
Rp4.6 trillion to Rp4.5 trillion and above our expectation of Rp4.3
trillion revenue in 2010. Mirroring the revenue, income from operations
also decreased slightly 6.4% from Rp1.2 trillion to Rp1.1
trillion.
Extreme weather took its toll
Extreme weather in 2010 took its toll where Indonesian coal producers
had to trim production target. Although HRUM had met its
7.4 million coal production target (according to company but no
specific numbers yet released), we expect the only slight increase
of coal price and appreciation of rupiah offset the positive impact
from the increase of coal production. The other two coal producers
(PTBA and ITMG) that had announced the 2010 results all
saw their net income dropped in 2010. Net income of PTBA decreased
26% and net income of ITMG decreased 39% in 2010.
The numbers highlighted the adverse condition that the Indonesian
coal producers had to face in 2010.
Coal demand and Japan Disaster
Newcastle Coal price did turn lower from the day of Japan Tsunami
(March 11,2011) from US$129.6/tonne to US$123.3 in
March 18,2011. However HRUM has not experienced cancellation
of enquiries from Japanese buyers. Instead, we expect that
the upcoming construction efforts to rebuild the heavily damaged
areas in Japan will increase coal demand from Japan for the use
of industrial users like cement. The coming increase of coal demand
will also come from the need of Japan to supply electricity
via coal-fired power plants, replacing the lost of electricity from
nuclear power plants
2011 will be much better (reviewing our target price)
We believe that 2011 will be much better for HRUM than 2010.
From our model, we estimate that HRUM will realize Rp1.8 trillion
of net profit, more than double from 2010 net income in the back
of strong increase of coal price and production volume. We are
currently reviewing our previous target price of Rp9,300/share
while waiting for production details from the company.
Booked net income growth in 2010
Harum Energy had been able to book net income growth in 2010
despite extremely bad weather that coal producers had to encounter
last year. Net income grew 7.4% from Rp767 billion to
Rp824 billion. The bottom line of 2010 was below our expectation
of Rp880 billion in 2010. HRUM’s revenue decreased 2.5% from
Rp4.6 trillion to Rp4.5 trillion and above our expectation of Rp4.3
trillion revenue in 2010. Mirroring the revenue, income from operations
also decreased slightly 6.4% from Rp1.2 trillion to Rp1.1
trillion.
Extreme weather took its toll
Extreme weather in 2010 took its toll where Indonesian coal producers
had to trim production target. Although HRUM had met its
7.4 million coal production target (according to company but no
specific numbers yet released), we expect the only slight increase
of coal price and appreciation of rupiah offset the positive impact
from the increase of coal production. The other two coal producers
(PTBA and ITMG) that had announced the 2010 results all
saw their net income dropped in 2010. Net income of PTBA decreased
26% and net income of ITMG decreased 39% in 2010.
The numbers highlighted the adverse condition that the Indonesian
coal producers had to face in 2010.
Coal demand and Japan Disaster
Newcastle Coal price did turn lower from the day of Japan Tsunami
(March 11,2011) from US$129.6/tonne to US$123.3 in
March 18,2011. However HRUM has not experienced cancellation
of enquiries from Japanese buyers. Instead, we expect that
the upcoming construction efforts to rebuild the heavily damaged
areas in Japan will increase coal demand from Japan for the use
of industrial users like cement. The coming increase of coal demand
will also come from the need of Japan to supply electricity
via coal-fired power plants, replacing the lost of electricity from
nuclear power plants
2011 will be much better (reviewing our target price)
We believe that 2011 will be much better for HRUM than 2010.
From our model, we estimate that HRUM will realize Rp1.8 trillion
of net profit, more than double from 2010 net income in the back
of strong increase of coal price and production volume. We are
currently reviewing our previous target price of Rp9,300/share
while waiting for production details from the company.