StockNote

Dang Maulida
dang.maulida@ipc.co.id (62-21) 5793 1168 (62-21) 5793 1167

PT Indo Tambangraya Megah Tbk

Rp17,050 BUY 1Q09 Performances
After Indonesia parliementary election 9th of April 2009, ITMG share prices woke up from its stagnant state before April 9th and crept up by 46% to close at Rp17,000 last week. Post parliementary election in Indonesia, the share price eventually factored in improved domestic circumstances as well as partial recovery of the US economy. From technical point of view we might expects that Rp10,000s level has formed a strong support. From fundamental side, ITMG reported 1Q09 net profit of US$102mn (+437%, YoY), with revenue of US$347mn, (+59%, YoY). In response of these two (2) events, we lower our WACC to 12.4% and slightly increase earnings, to result in higher target price of ITMG of Rp18,495 per share. We maintain our BUY recommendation.
BUY Unchanged 18,495 8%
ITMG Share Price Movement -2009

19 May 2009

Indonesia Mining
RECOMMENDATION 12M rating 12M target price (Rp) Upside (downside) SHARE STATISTIC Out shares (b) Market Cap (Rp b) 12M Hi-Lo (Rp)

( Rph )
20000 18000

Before 9th of April

After

1.13 19,265 35,700 5,950

16000 14000 12000 10000

STOCK PRICE PERFORMANCE 1M 3M 12M

16% 73% (34%)

8000 6000 4000 2000 0 1/5/2009

stagnant state

crept up to gain by 46%

Last Price

MAJOR SHAREHOLDERS Banpu Minerals (Singapore) Pte Ltd 73.72% Management 0,02% Public 26.26% LATEST RESULTS (USD million) 1Q09 1Q08 chg Sales 347.0 218.9 59% COGS 205.3 168.0 22% Gross Profit 141.7 50.9 178% Op. exp 27.7 25.3 10% Op. profit 113.9 25.6 345% Other inc/(exp) 29.9 (0.3) -9175% Pre-tax inc 143.9 25.3 469% Net profit 101.8 18.9 437% EPS (USD) 0.09 0.02 350% Source: Company Data, IPS Estimates

2/5/2009

3/5/2009

4/5/2009

5/5/2009

Source: Bloomberg

1Q09 Results ITMG reported 1Q09 net profit of US$102mn (+437%, YoY), on the back of US$347mn revenues (+59%, YoY). 1Q09 net profit was 45% of our full year 2009 estimates, while revenues was 25%. ASP for 1Q09 was US$85.03/ton, or an increased of 69.9% YoY, while production level came in at 4.4 mn ton. As a result of higher ASP and declining production cost per unit, profitability margins in 1Q09 significantly increased to 41% for gross margin (vs.23% in 1Q08), and 33% for operating margin (vs.12% in 1Q08). In addition, gain in derivative transaction in the amount of US$28.7mn boosted net profit to result in net profit margin hiked to 29% in 1Q09 vs. 9% in 1Q08. 1Q 09 Production level ITMG produced 4.4mn tons in 1Q09 with higher stripping ratio of 14.0 times as compared to 10.5 times in 1Q08. Production in 1Q09 only accounted for 22% of its 20mn internal production target for FY09, and 23% of our estimates of 19mn ton. ITMG stated to still target 20mn ton with planning to meet production shortfall by ramping up its coal productions from its new East Block (Indominco) that can produce additional 2.0mn ton for the rest of the year. Given the situation, we maintain our full year production target for ITMG of 19mn ton of coal produced and sold.

RELATIVE STOCK PRICE PERFORMANCE (early IPO =100)

200 180 160 140 120 100 80 60 40 20 May-08 Mar-08 May-09 Dec-07 Nov-08 Dec-08 Sep-08 Mar-09 Feb-08 Feb-09 Oct-08 Jan-08 Jun-08 Apr-08 Jan-09 Jul-08 Aug-08 Apr-09 ITMG JCI Index

Source : Bloomberg

Refer to Disclaimer Statement at the last page of this report

PT Indo Tambangraya Megah Tbk BUY

Coal contract status: 1Q09 As of 1Q09, ITMG has secured pricing for 76% of this years production target or 15.2mn ton coal at a price range of US$76 US$78 per ton. 12% of of production or 2.4 mn ton has been contracted at a price linked to an index, 7% of volume, or 1.4 mn ton is sold with price under negotiation, and only 5% of production or 1 million ton of coal are not yet sold. ITMG expects ASP for this year to be in the level of US$74/ton which we think achievable given the current contract status. FY09 earnings outlook In response to 1Q09 results, we increase our ASP to US$74/ton (vs. previously US$72/ton) to reach an estimated full year revenues of US$1.406mn, +7% YoY. With estimated total production cost at US$53.6/ton (vs. US$55.2/ton in FY08), we arrive at net profit of US$256.95, representing an earnings growth 9% YoY. Our earnings estimates is on condition that spot coal price does not fall significantly below the current US$60s level/ton. Given current preliminary recovery on the US economy that has raised oil price to the current level of US$58/barrel we are comfortable that our estimates can be met. Valuation With WACC of 12.4%, our current estimates in the DCF calculations resulted in the share price of ITMG to be valued at Rp18.495 per share, still gives potential upside of 8.5% from yesterdays closing price of Rp17.050. From earnings multiple valuation , at Rp17.050, the share is trading at 6.82 X FY09 earnings, which is below the market rating of 10 X FY09 earnings. We view upsides exist in our DCF-based valuation calculation. In addition , ITMG share price characteristic is that it has a high volatility,daily standard deviation of return of 5.8% in 2008 (vs. the JCI of 2.5%), and this provides trading opportunity to investors. Recommendation ITMG is a listed coal producer with a good fundamental, strong balance sheet and cash position, and also with sufficient management transparency. We retain our BUY recommendation.
Forecasts and Valuation Revenue (US$mn) Pre-tax (US$mn) EPS (US$) EPS growth (%) BV/share (US$) PER (x) PBV (x) DPS (Rp) Dividend yield Source: IPS Estimates 0.88 14.84 1.77 794 4.7% 2007 772 88 0.1 2008 1,317 346 0.21 99% 0.54 7.46 2.87 1,345 7.9% 2009E 1,406 384 0.23 9% 0.59 6.82 2.63 900 5.3% 2010E 1,505 341 0.2 -14% 0.56 7.89 2.78 900 5.3%

PT. INDO PREMIER SECURITIES

Head Office
Wisma GKBI 7th Floor Suite 718 Jln. Jenderal Sudirman Kav.28 Jakarta 10210 Tel. (62-21) 5793 1168 Fax. (62-21) 5793 1167

Branch Office
Boulevard Artha Gading Blok A7A No. 3 Kelapa Gading, Jakarta Utara Tel. (021) 4587.4168 Fax. (021) 4587.4167 Wisma Dharmala Surabaya Lantai Mezzanine Jl. Panglima Sudirman 101-103 Surabaya 60271 Tel. (031) 5487050 Fax. (031) 5487051 Jl. Sulawesi No. 88 Makassar 90174 Tel. (0411) 333.168 Fax. (0411) 333.167 Graha International Lantai 1 Jl. Asia Afrika 129 Bandung 40112 Tel. (022) 4221758 Fax. (022) 4221778 Jl. Sultan Agung No.104-106 Semarang 50232 Tel. (024) 850.5961 Fax. (024) 850.5962 Gedung Uniplaza Lt.3 West Tower Jl. M.T. Haryono No. A-1 Medan Tel. (061) 4550168 Fax. (061) 4552371

DISCLAIMER
This document and any attachments are confidential and may also be privileged. If you are not the intended recipient of this document you must not directly or indirectly use, reproduce, distribute, disclose, print, reply on, disseminate, or copy any part of the document or its attachments and if you have received this document in error, please notify the sender immediately by return e-mail or delete it from your system. All opinions & estimates contained in this document constitute our judgments as of this date, without regards to its fairness and are subject to change without notice. This document has been prepared for general information only, without regards to specific objectives, financial situation and needs of any particular person who may receive it. No Responsibility or liability whatsoever or however arising is accepted in relation to the contents hereof by any company mentioned herein, or any of their respective directors, officers or employees. This document is not an offer to sell or a solicitation to buy any securities. Indo Premier Securities, its affiliates and their officers and employees may have position, make markets, as principal or engage in transaction securities or related investment of any company mentioned herein, may perform services or solicit business from any company mentioned herein.