Adaro Energy (ADRO) had attracted us when it noted an increase of
net profit about 393.2% at Full
Year 2009. Its share
also went up to 2,100 - 2,200 even though previously it was corrected till
level 1,790. However, it seems that now is the right moment for you, who hold
ADRO, to go out. Why?
The Coal price during one month still strengthens. At closing time
this week, the index of Newcastle Australian stood at USD 108.9 per ton, rose
8.7% from last week. The Index of ARA even remained at USD 88.52 per ton, went
up 12.5% from last week. So, the coal sector seems still promising.
The operational report of ADRO also showed a good increase. ADRO
produced 11.4 million ton coal in the first quarter of 2010, went up 26% from the
same period last year. The sale of coal also mounted 31%. Some other
operational indicators like overburden (the land which was dug to take existing
coal under), the amount of sent coal, and the amount of sold coal, increased 20%
in average.
Then why do you have to go out from ADRO now?
It is because ADRO seems not (or not yet) continue its positive
trend on the monetary performance like the previous year. ADRO noted a degradation
of net profit around 24.9% at the first quarter of 2010 compared to the same
period last year. The sale and its operational profit also decreased about 3.9%
and 15.9%. One of the main factors that caused the degradation of its net
profit was the increase about 57.0% at interest expenses and finance charge. On
31st March 2010, ADRO has a quite big long-range bank debt: Rp9.2 trillion,
where the Rp2.1 trillion will mature this year.
If we see from its share price about 2,200, it can be classified
as a quite expensive share. The share of ADRO has gone up 27.2% since early
2010. During this year, the highest price of ADRO is 2,250 (so, its price now
is close to its peak). With market cap around Rp70.4
trillion, the price of ADRO is almost four times of its equity value, and its
PER ratio is 20.4 times. This is overvalue.
Nevertheless, the increase of the coal price will give positive
effect to the price of ADRO, so that ADRO still have an opportunity for
strengthening, but this might not happen during the recent days. Within a week
later, ADRO may be stagnant at level 2,200 or a little bit corrected. How big
its correction will be? I predict it will be not too big because technically,
ADRO fair price is 1,950 - 2,050.
However, can ADRO strengthen within a week? Yes of course it
possible, but the possibility is very small.
Original article is written on May 1, 2010
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