On this day, July 25, 2014, several public companies has released their
financial statements for the period of first half of 2014, either through the
website of IDX or newspaper. Unfortunately most of them recorded a
disappointing performance, if viewed from their negative growth of net income.
However there is one company that shows good performance with 30% of net profit
growth: PT Bukit Asam (PTBA). This
coal company may represent the overall performance of coal mining sector which
was begun to rise in 2014, after slowing down in the last two years. Prospects?
PTBA can be said to be the oldest coal mining company in Indonesia. The
history of the company began in 1876 (138 years ago) when the Dutch East Indies
government open a coal mine, perhaps the first in Indonesia, in Ombilin, West
Sumatra. In 1919 the Dutch East Indies government open another coal mine in Tanjung Enim, South Sumatra. Decades
later, including after Republic of Indonesia's independence, the mining
operations were conducted without a corporation. But finally in 1981, PTBA
officially established as a government owned (SOE) limited liability company in
the field of coal mining. In 1990, another SOE of coal mining, namely PU Tambang
Batubara, merged with PTBA, so PTBA became the only state-owned enterpreise in
the field of coal, until today.
PTBA went public in 2002, and since then the company has continued to grow
until they has the following businesses:
- Four location of coal mines, ie in Peranap,
Ombilin, Tanjung Enim (all in Sumatra), and Samarinda (East Kalimantan).
The total combined coal reserves of the mines are nearly 2 billion tons (and still can be increased
along with the work of exploration), that makes PTBA as the second largest
coal mining company in Indonesia in terms of the volume of coal reserves,
after Bumi Resources (BUMI). The majority of the coal reserves are
concentrated in Tanjung Enim.
- Coal Trading
- Power plants, which are located in Tanjung
Enim
- Logistic facilities, in this case the railway
network which connects Tanjung Enim coal mine site to the port in Lampung
and Palembang, and
- Coal bed methane facilities. The latter arguably, if in Indonesia, only companies that have.
PTBA is one of the coal companies with the healthiest financial position in
the Stock Exchange, where the company has almost no debt except for accounts
payable, and its equity also continues to grow from year to year, although the
company is generous in paying dividends, which is about 50 - 60% of its annual
net profit. We could say that the company is benefited from the fact that since
its inception, it has been occupied the most ‘fat’ coal mine in Sumatra (or
even in the world), namely Tanjung Enim, so the company only need cash for work
of exploration only. This is in contrast to many private coal companies who have
to pay expensive, or applying loan to banks, if they want to acquire a good 'spot'
of coal mine. When PTBA added its mining portfolio by acquiring coal mines in
Peranap and Samarinda (Ombilin coal mine also have been acquired since the
inception of the enterprise), it was because the company had a surplus from
operating results of Tanjung Enim. Actually, just by holding Tanjung Enim only,
PTBA is already one of the largest coal company in Indonesia, or even the
world.
Because of that, the majority of the development works undertaken by the
company during these times is focused in Tanjung Enim. PTBA is one of the few
coal company in Indonesia which has railway network of their own, and also have
the facility of coal bed methane (and also power plants, but it is not only
PTBA that has power plants). Sometimes I think that the company should be able
to take advantage of its position as the owner of one of the largest coal mines
to do more, let say, become one of the controlling coal prices in the
international market so that the performance of PTBA is no longer dependent on
fluctuations in the price of coal.
However, the management is not that great, where they would rather spend
the net profit to pay dividends to shareholders rather than using it to build
specific business development projects (PTBA continue to build new power plants
and increase the capacity of its rail network, but no more than that). However,
when compared with some other giant coal companies in the country, PTBA is very
worth for investment because the company is debt free and play in the
'wetlands', namely Tanjung Enim earlier. If the price of coal later return to US$
100 per ton, then the company should make a super financial performance.
Bit of information, even though the company is the owner of one of the
largest coal reserves in the world, but so far the volume of coal production is
only about 12 million tons per annum, much lower than Adaro Energy (ADRO) by 53
million tons, or Bumi Resources (BUMI) by 80 million tons. PTBA actually expects
to be able to produce up to 50 million tons of coal per annum from a few years
ago, but until now it has not been realized (or only postponed? Because the
prices of coal were so low between 2012 and 2013). If you look at the fact that
PTBA is a coal company with the best profit margins in the Indonesia Stock
Exchange (net profit margin on revenues reached 17%, while the highest record
of other coal companies was only 10 - 11%), coupled with the possibility that
the volume of coal production could 'jump' at any time when coal prices later
recovered, then of course.. what more can I say? The company is very attractive
for investment.
Then what about valuation of the stock?
PTBA is one of the stocks with best fundamentals in the Indonesia stock
exchange, and that’s why its valuation is never really low, but almost always at
a premium. In 2011 when the coal industry reached its peak performance, PBV of PTBA
had reached more than 7.0 times. At the current share price, ie Rp11,450 per
share, the PBV is 3.5 times, with 10.8 times of PER (as a mature and
well-established company, valuation of PTBA also can be seen from its PER). Frankly,
I still feel a little hesitant in giving an opinion to whether the PBV of 3.5
times is still worth a buy or not, because the number is, of course, can not be
said to be low, but in the past the PBV of PTBA was almost always maintained at
the level of 4 - 4.5 times. And with its recent financial performance that is arguably
the most prominent even among the coal companie, then PTBA is likely the only
option for investors who like stocks of coal. If you've been holding the since
the beginning, then it is advisable to hold.
If there is something that might drag PTBA down is if the Jakarta Composite
Index (JCI) down. As already mentioned above, the performance of the companies
in the second quarter of 2014 was not so good, so the position of JCI at the
moment is less supported by fundamental factors, but only because foreigners
continued to buy after Jokowi win the presidential election. However, if later the
index is actually down, it is also possible that PTBA will drop to Rp9,500 – 10,000
per share, which is ideal to buy to then leave it alone until the end of the
year. Well, we'll see how it goes.
PT Bukit Asam (Persero), Tbk.
Rating of Performance in First Half 2014: AAA
Rating of Stock Price at 11,450: A
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