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Pre-IPO Commentary on Borneo Lumbung Energy & Metal New Kid on the Block Borneo Lumbung Energi & Metal (BLEM) is Indonesia’s first premium hard coking coal producer. The company offers one of the strongest volume growth potential in the region, combined with a first-mover advantage in Indonesian coking coal space. However, this comes with a high execution risk, particularly given its challenging logistics and infrastructure. Valuation ranges 9-13x FY11 P/E, relatively at par with Indonesian thermal peers and recent HK coking coal IPO (MMC), but cheaper than current valuation of its regional coking coal and PCI peers. We have an IPO preview note this morning on Borneo Lumbung. * Borneo Lumbung Energi & Metal (BLEM) is Indonesia’s first hard coking coal producer, producing premium quality coal of 8,300kcal/kg ADB with good coking properties . * The company offers one of the strongest volume growth potential in the region (+77% CAGR in FY09-12), leverage on coking coal price strength, combined with a first-mover advantage in Indonesian coking coal space (another Indonesian coking coal development, Maruwai, is still some 4 years away). * There is sizable upside to reserves as well, as only 7% of total concession are is currently explored. * However, this comes with a high execution risk, particularly given its challenging logistics and infrastructure (35km hauling and 562km barging distance). * Valuation is modest, ranging 9-13x FY11 P/E, relatively at par with Indonesian thermal peers (11.9x FY11 P/E) and recent HK coking coal IPO (MMC was priced at 12.6x FY11 P/E and now trading at 15.1x FY11 P/E), but attractive compared to its regional coking coal and PCI peers of 20-22x FY11 P/E. * Separately, this IPO could also bring good indication for ADRO's future value proposition, since it has 25% stake in Maruwai. (the next coking coal asset in line, 15x larger than BLEM's concession area) CLSA 27 Oct 2010 http://www.financeindonesia.org/showthread.php?1923-Prospektus-Borneo-Lumbung http://www.financeindonesia.org/showthread.php?1966-Pre-IPO-Commentary-on-Borneo-Lumbung-Energy-amp-Metal
