> >
> > *Subject: *FW: Goldman: Buy Adaro, Sell Bumi
> >
> >
> >
> >
> >
> >
> >
> > Please see latest GS research on ASEAN Metals and Mining (Coal), and on
> > Bumi and Adaro.
> >
> > *Stock GS Rating Current Px *
> > *12 Month Target Px * * *
> >
> > *Bumi Resources (BUMI.IJ) **Sell **Idr **2,850
> > **Idr **2,300 *
> >
> > *Adaro (ADRO.IJ) **Buy **Idr **1,510 **
> > Idr **2,800*
> >
> > * *
> >
> > *Key Summary Points:-*
> >
> > · * **Rising oil prices are positive for coal equities*
> >
> > Historically, thermal coal prices have been highly correlated to oil prices
> >
> > (88% over the past 10 years), and so have coal stock prices (87% correlated
> >
> > since 2003). We are positive on the outlook for oil, and last month we
> >
> > raised our 2010E and 2011E oil price forecasts to US$90/bbl and US$110/bbl,
> >
> > respectively, on stronger demand projections (our report from September
> >
> > 24, 2009, "Global: Energy: Oil—Recovery and relapse, v2").
> >
> > · * **No major supply destruction, some projects nearing completion*
> >
> > Despite the downturn, there has not been any major reduction in thermal
> >
> > coal capex and in fact several projects are nearing completion. Australia's
> >
> > new third coal port terminal (NCIG) is expected to ship first coal in early
> >
> > 2010E, with a full ramp-up by 2011 (representing a 30% expansion in
> >
> > export capacity). Meanwhile, we estimate that Indonesian coal producers
> >
> > may increase capacity by 40% by year-end 2010E. Our global thermal coal
> >
> > supply-demand estimates indicate that the supply surplus in 2009E is likely
> >
> > to narrow in 2010E due to stronger demand, but it is still in surplus.
> >
> > · * **Coal price upcycle may lag oil, initiate with neutral stance*
> >
> > Given our positive view on oil prices, we are forecasting higher thermal
> >
> > coal prices over 2009E-2011E. However, with a stronger supply availability
> >
> > of coal, we believe that the coal price cycle may lag oil. Currently
> > thermal
> >
> > coal prices are 20% of oil on an energy-equivalent basis, which is below
> > the
> >
> > historical average of 26% (the historical range is 14%-51%). On an annual
> >
> > average basis we see coal as a percentage of oil declining from 25% in
> > 2009E
> >
> > to 17% in 2011E. We are initiating coverage on the sector with a neutral
> > stance.
> >
> > · * **Stock selective approach; Buy Adaro, Sell Bumi*
> >
> > Adaro is our top pick, given attractive valuations and a strong earnings
> >
> > growth trend as its low-priced legacy contracts expire. Meanwhile, we rate
> >
> > Bumi Resources as Sell due to rising capital costs, its increasing debt
> > load
> >
> > and declining ROIC. We initiate on Straits Asia and Bukit Asam at Neutral.
> >
> > · * **Risks*
> >
> > Upside risks to our views and price targets include a disruption in the
> >
> > global coal supply chain (e.g., from bad weather, port congestion) causing
> >
> > coal prices to spike or China coal demand being stronger than we expect;
> >
> > downside risks include China's small mines restarting operations.
> >
> > - *Latest Research*
> >
> > <<ASEAN Metals & Mining Coal 21 OCt.pdf>>
> >
> > Goldman, Sachs & Co. Member SIPC/NASD.
> >
> >
> >
> > ************ ****
> >
> > CONFIDENTIALITY: The information contained in or attached to this electronic transmission
> >
> > is confidential and may be legally privileged. It is intended for the named recipient(s) only.
> >
> > If you are not the named recipient, you are hereby notified that any distribution, copying,
> >
> > review, retransmission, dissemination or other use of this electronic transmission or
> >
> > the information contained in it is strictly prohibited.
> >
> > The information expressed herein may contain the private views and opinions of the sender
> >
> > that does not constitute the formal views and opinions of PT. Danareksa (Persero) and its
> >
> > subsidiaries, and should not in any ways be construed as the views, offers, or acceptances
> >
> > of these entities, unless specifically stated. PT. Danareksa (Persero) and its subsidiaries
> >
> > does not take any responsibilities nor accepts any claims of liabilities and/or damages
> >
> > for statements which are clearly the sender's own and not made on behalf of the entities
> >
> > concerned.
> >
> >
> >
> >
>
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