State-owned coal producer PT Tambang Batubara Bukit Asam (PTBA) Tbk booked net profit of Rp1.16 trillion in the first half of 2014, grew by 33% from the corresponding period of 2013 due to higher sales volume and improved profit margin despite falling prices. Also in this report: Geo Energy’s Notes and New Coal Export Policy.

Bukit Asam posted sales revenue of Rp6.43 trillion in the first half, grew 18% from the corresponding period of 2013 because of its ability to sell 8.83 million tons of coal. Sales volume was actually flat compared to 8.74 million tons in the first half of 2013, but depreciation of rupiah by more than 15% lifted Bukit Asam’s sales revenue.

The company managed to improve its profit margins with 2% growth in net profit margin (NPM) to 18%, while EBITDA margin was 26%. The net profit represents earning per share of Rp503. Annualized at Rp1006, the current price (Rp10575) reflects PE  multiple 10.5. The current market capitalization of Rp24.4 trillion equals to three times equity as at March 31, 2014. It is cheaper than companies in other sector with annualized ROE of 32%, but discounted by negative sentiment towards the coal industry.

Bukit Asam produced 7.7 million tons of coal in the first half, grew 16% from the same period of 2013, while average selling price increased by 17% to Rp726,766/ton from Rp621,792/ton in H1/13, again due to falling rupiah.

GEO ENERGY RESOURCES: The junior coal producer, listed on the Singapore exchange (SGX), has finally issued S$100 million senor debts with coupon rate of 7% due January 2018. The Notes were issued pursuant to the S$300 million multi-currency MTN program established late last month. The company plans to use proceeds from the Notes to finance acquisition of Borneo International Resources Pte Ltd.

“This proposed acquisition will help the Group to increase coal production levels and will also allow the Group access to and control over the coal deposits located in the relevant permit areas. These licenses cover an area of over 236.1 hectares in subdistrict Angsana, Regency of Tanah Bumbu, South Kalimantan Province, Indonesia,” said Geo Energy last Friday.

United Overseas Bank Limited has been appointed as the sole lead manager and bookrunner for the Notes. Geo Energy Resources is controlled by the family of Charles Antonny Melati.

EXPORT POLICY: Minister of Trade M Luthfi has issued Regulation No 39/M-DAG/PER/7/2014 about export of coal and coal products on July 15, 2014. The regulation is effective September 1st, 2014. The regulation divides two categories of coal: (1) Coal and Coal products whose export are restricted, and (2) coal, whose calories shall be certified.

Among coal restricted for export are anthracite and bituminous coal with HS Code 2701.11.00.00 and 2701.12.00.00 respectively. Government also restricts export of thermal coal (HS Code 2701.12.10.00) and other coal, peat, coal-bed-methane (HS Code 2705.00.00.00), coking and semi-coking coal etc.

Also restricted for export is lignite coal (also known as brown coal) both crushed, but not agglomerated, and agglomerate lignite coal. The regulation also resticts export of derivatives of coal, including benzene, toluene, xylene, naphtha,

Calorific value of anthracite, bitiminous coal, thermal coal (HS Code 2701.12.10.00), and lignite coal for export have to be verified first (Annex II).

According to the new regulation, export of coal in Annex II of the Regulation can only be done by companies registered as exporter of coal (ET-Batubara). In order to be certified as ET-Batubara, companies shall apply to Director General of the ministry with copies of mining business licenses (IUP for production, transportation, and marketing or special operation production license for processing and or refining).

Let’s see whether the new regulation would (1) cut export volume of low-rank coal, (2) promote domestic investments in coal upgrading facilities or (3) development of coal-based chemicals.

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