DAILY INSIGHTS EQUITY RESEARCH

Tuesday, 4 March 2008 MININGSECTOR/COMPANY UPDATE

BUY Indo Tambangraya Megah

Maintain

Price Rp27,200
Target Price Rp38,300 Everything’s good
Unchange
Better-than-expected FY07 core earnings
Bloomberg Code ITMG IJ Despite lower volume and higher total cash costs, ITMG posted strong core earnings of US$70mn,
Reuters Code ITMG.JK
No. of shares (mn) 1,129.9 +112% yoy, on the back of higher ASP and a lower effective income tax rate. The core earnings
Market cap (Rp bn) 30,733 were higher than our forecast. However, if we had used the same volume and ASP assumptions,
(US$ mn) 3,378 our FY07 earnings forecasts would have been in line with ITMG’s.
Weight in JCI (%) 1.7
3m Avg. daily T/O (US$ mn) na
Upside on the pricing
Price (Rp) ITMG has already secured 70% of this year’s volume at US$54/ton. Another 11% has already been
12 mos Hi/Lo 30,500/14,000 secured in terms of volume but has not been priced, and the remaining 19% has not been either
secured or priced. Mostly of low quality Jorong volume has been secured and priced, and we can
PER - 2008F (x)
expect that the non-priced volume will be of higher quality. As such, we can expect that the FY08
12 mos Hi/Lo 19.3/8.8
ASP shall be higher than our estimate of US$57.2/ton. Our sensitivity analysis suggests that for
EV/EBITDA - 2008F (x) every 5% change in our FY08 ASP, our FY08 earnings forecast shall change by 14.2%.
12 mos Hi/Lo 9.2/4.0
Greater confidence in the reserves
Key Financial 08F/09F
Net gearing, % net cash Although it will take more time to get the license from the Ministry of Forestry before ITMG can
ROAA, % 23.0/36.6 mine the Indominco East block, ITMG’s success in getting the principal license from the Presidential
ROAE, % 35.5/49.5 office has boosted our confidence in the Company’s ability to monetize its reserves and resources.
We also see further potential upside on the reserve calculations as the current reserves estimate
Price Relative to JCI (%)
is still based on a US$40/ton coal price assumption.
1 mo 2.6

USD/IDR - YE (Rp) Maintain BUY, TP of Rp38,300

2007 9,400 We maintain our BUY call on the stock and retain our share target price of Rp38,300. The target
2008F 9,445
price implies FY08 PER of 24.2x and EV/EBITDA of 11.6x and offers 41% upside. BUY.
Major shareholders (%)
Centralink Wisesa Intl. 78
Others 22

Rp ITMGshare price (LHS) relative to JCI (RHS) %

120
32,000
100
29,000
26,000 80 Year to Dec, US$m 2005 2006 2007F 2008F 2009F
23,000 60

20,000 40 Sales, US$ mn 477 673 772 1,094 1,536

17,000 20 Sales growth, % 51.8 41.1 14.7 41.8 40.3
14,000 0 EBITDA, US$ mn 135 119 167 395 713
1/7/2008

EBITDA growth, % 92.5 (11.8) 40.6 136.1 80.6

1/28/2008

2/18/2008
12/17/2007

Net profit, US$ mn 75 25 57 195 375

Net profit growth, % 122.5 (66.7) 128.2 242.8 92.9
Core profit, US$ mn 76 35 70 209 394
Isnaputra Iskandar, CFA Core profit growth, % 105.0 (54.3) 100.4 200.8 88.3
(62-21) 350 9888 ext.3504 PER, x 44.8 134.3 58.8 17.2 8.9
isnaputra@danareksa.com Core PER, x 44.0 96.2 48.0 16.0 8.5
EV/EBITDA, x 25.7 29.0 19.3 8.1 4.1
Yield, % 0.0 0.0 0.6 1.0 3.5
Danareksa research reports are also
available at Reuters Multex, First Call
Direct and Bloomberg

www.danareksa.com
4 March 2008 DAILY INSIGHTS

Exhibit 1. ITMG’s strong FY07 earnings

FY06 FY07 YoY 2007F Actual/F Adjusted YoY

% 2007F* %

Sales volume, mn tons 19.3 18.1 -6 18.0 101% 18.0 101

Production volume, mn tons 19.6 17.8 -9 18.0 99% 18.0 99
Selling price, US$/ton 38.4 42.3 10 40.0 106% 40.0 106
Total cash costs, US$/ton 31.3 34.0 9 30.8 110% 31.4 108

Net sales, US$ mn 732 772 5 682 113% 731 106

Gross profit, US$ mn 187 207 11 169 123% 209 99
Operating profit, US$ mn 83 122 48 90 135% 128 95
EBITDA, US$ mn 120 167 40 128 130% 167 100
Net profit, US$ mn 23 57 144 47 121% 73 78
Core profit, US$ mn 33 70 112 47 149% 73 95

Gross margin, % 25.5 26.9 24.7 28.5

Operating margin, % 11.3 15.8 13.2 17.6
EBITDA margin, % 16.3 21.7 18.8 22.8
Net margin, % 3.2 7.4 6.9 10.0
Core net margin, % 4.5 9.0 6.9 10.0

*adjusted for actual ASP & income tax rate

Source: Company & Danareksa Sekuritas

Exhibit 2. Sensitivities of FY08 earnings on changes in selling price

FY08 earnings Change

US$mn %

ASP -10% 139 (28.3)

ASP -5% 167 (14.2)
ASP (base case) 195 0.0
ASP +5% 222 14.2
ASP +10% 250 28.3

Source: Danareksa Sekuritas

2
4 March 2008 DAILY INSIGHTS

Share price and recommendation

Date 6-Feb-08 4-Mar-08

Rating BUY BUY
Price Target, 38,300 38,300
32,000

30,000

28,000

26,000

24,000

22,000

20,000

18,000

16,000

14,000
12/17/2007

12/31/2007

1/14/2008

1/28/2008

2/11/2008

2/25/2008

DISCLAIMER
The information contained in this report has been taken from sources which we deem reliable. However, none of P.T. Danareksa Sekuritas and/or its affiliated companies and/or their respective employees
and/or agents makes any representation or warranty (express or implied) or accepts any responsibility or liability as to, or in relation to, the accuracy or completeness of the information and opinions
contained in this report or as to any information contained in this report or any other such information or opinions remaining unchanged after the issue thereof.
We expressly disclaim any responsibility or liability (express or implied) of P.T. Danareksa Sekuritas, its affiliated companies and their respective employees and agents whatsoever and howsoever arising
(including, without limitation for any claims, proceedings, action , suits, losses, expenses, damages or costs) which may be brought against or suffered by any person as a results of acting in reliance upon
the whole or any part of the contents of this report and neither P.T. Danareksa Sekuritas, its affiliated companies or their respective employees or agents accepts liability for any errors, omissions or mis-
statements, negligent or otherwise, in the report and any liability in respect of the report or any inaccuracy therein or omission therefrom which might otherwise arise is hereby expresses disclaimed.
The information contained in this report is not be taken as any recommendation made by P.T. Danareksa Sekuritas or any other person to enter into any agreement with regard to any investment mentioned
in this document. This report is prepared for general circulation. It does not have regards to the specific person who may receive this report. In considering any investments you should make your own
independent assessment and seek your own professional financial and legal advice.