When coal company, Berau Coal Energy (BRAU), decided to conduct an IPO some time ago, some of observers had questioned the decision. Because regardless of the fundamentals of BRAU itself, the coal sector in Indonesia in these days is being in a state of decline. At the end of 2009, most of coal companies in Indonesia were enjoying significant increase in revenues and net income, sustained by increase in coal prices. However, in 1Q10, the income of coal companies began to decline, along with decline of volume production. And the decline was still continued in last 1H10.
Take Adaro Energy (ADRO) as an example, which its net profit decreased 48.7% in 1H10 compared to 1H09. Similarly, Bumi Resources (BUMI) , its net profit fell 30.0%. You can check other coal companies: most of them, including BRAU, had declined performance with varying percentages, except maybe some smaller coal companies.
The cause of the degradations is, as already mentioned above, is due to lower volumes of coal production, thus automatically reducing the volume of sales. The reason? Weather factor. In recent months, most areas in Indonesia including coal mine sites are still in under heavy rain though it was entering the dry season. The rainfall is clearly inhibits the production of coal, especially the drying process. As we know, the coal result from the excavation must be dried before it could be used as fuel, where the drying process will be so difficult if rainfall continues. As a result, the overall production process are blocked.
The performance declining in the coal sector, inevitably influence its stock price, although not all of them. Some of popular coal stocks are starting to weaken. ADRO, that some time before had steady at 2.000 to 2.100, now is beginning to fall into the position of 1.940. BUMI is also only capable to move on the 1.700's. What about BRAU? Contrary to the expectations of many observers (including me) who had estimated that BRAU will rise, BRAU was capable to rising for a moment only, then dragged by the weakening of the other coal stocks. When this article was written, BRAU stagnant at position 420, or only up 20 points from its initial price.
The good news is, although most of the coal company recorded a decrease in performance which impact on declining of its stock, but some of smaller coal companies were still able to record improved performance. An example is the Bayan Resources (BYAN) which reported an increased net profit by 45.1% in 1H10. As a result, BYAN now firmly in the position of 9.100, after at the end of June was still in the position of 6.200. That means BYAN had gained more than 40%! Although in valuation the price of 9.100 is too expensive, but because the performance BYAN in last 1H10 is like sticking alone in the midst of sector coal which declined, the stocks remain chaep psychologically, though of course the price at this time is prone to profit taking.
Then how about Harum Energy?
Like the other coal companies that experienced periods of glory in 2009, Harum Energy (HRUM) also recorded significant performance improvements in 2009, where its revenue increased 75% compared to 2008. Its net profit also rose to five times, or exactly 537%.
Unfortunately, HRUM is one of coal company which also recorded a decrease in performance in the year 2010. In 1Q10, HRUM record revenues of Rp 895 billion and net profit of Rp 134 billion . If these numbers are annualized, it will obtain revenue 3.6 trillion and net income of 536 billion for the full year 2010. When compared with 2009, which HRUM recorded revenues 4.6 trillion and net income of 768 billion, then the achievement of performance in 1Q10, is obviously not encouraging.
But what about the performance HRUM in 1H10? Who knows its better? HRUM performance in 1H10 is probably better than 1Q10, but if we look at the weather lately which is still not friendly, then the likelihood is small.
So, would HRUM in the end have fared just as BRAU? Before this conclusion, there is one more factor to consider:
We know that the coal sector is one of the investor's favorite sector in the IDX. The result is, usually the securities or the coal company itself will issued the 'powerful strategy' if the performance of this sector were fell, to attract investors to keep investing their funds in this sector and maintaining the liquidity of market. What is it? Playing with the future , of course (read more http://teguhidx.blogspot.com/2010/08/cara-mencermati-kabar-dari-emiten.html.) The performance of coal companies in 1Q10 and 1H10 are not so good, that's right. But what about the performance of the company in 2011 or 2012? Who knows it will increasing again as the year 2009, is not it?
And indeed that's what HRUM management do. HRUM announced that they expects the volume of coal production of 14.5 million tons in 2012, up nearly three times more than the realization of coal production in the year 2009, which is only 5.8 million tons (http://web.bisnis.com/sektor-riil/tambang-energi/1id207384.html.) For investors, such information may sound like as if the company has realized the coal production of 14.5 million tons (though not yet), so that they would be interested in buying its stocks.
Well the good news is, the stock price of coal is often influenced by positive sentiment like that. For example, PT Bukit Asam (PTBA). PTBA was also noted the decline in performance in 1H10, which its net income dropped 43.0%. But when this article was written, PTBA was firmly in position 18.450. Whereas on 24 August, PTBA was still in position 16.350. What happened? Apparently the relevant company just got a railroad construction project for purposes of transportation of coal (http://www.inilah.com/news/read/ekonomi/2010/08/25/769711/ptba-adani-global-pemda-sumsel-bangun-jalan-kereta-angkutan-batubara/.) The existence of the railway would facilitate the process of the company's production, so that the corporate's earnings in future will likely increase. As a result, the positive expectations of this news had boost PTBA of 12.8% in just a few days. Is PTBA performance in the future will actually increase as expected? Not necessarily.
Back to HRUM. When compared with BRAU, HRUM have better fundamentals because its debts are fewer (even though HRUM debts are also quite a lot). So the news of the production target in 2012 is likely to be responded positively by the market, (although the response might not be as good as the example of PTBA above, because the content of the news is different) so HRUM still have a chance to soar, maybe 10 - 20% on its first trading days, before then fall back or stagnant. Although the option to invest in HRUM is a bit speculative (because only rely on sentiment), but the risk is relatively smaller than if you buy BRAU.
But if your goal is for the long term, you should buy HRUM only if the weather during the dry season in Indonesia is back to normal. Moreover, the price of Rp 5,000 per share is expensive, especially if we look on the outlook of coal sector at this time.
Harum Energy
Rating of performance in 1Q10 : BB
Rating of stock price at 5.000 : BBB
Take Adaro Energy (ADRO) as an example, which its net profit decreased 48.7% in 1H10 compared to 1H09. Similarly, Bumi Resources (BUMI) , its net profit fell 30.0%. You can check other coal companies: most of them, including BRAU, had declined performance with varying percentages, except maybe some smaller coal companies.
The cause of the degradations is, as already mentioned above, is due to lower volumes of coal production, thus automatically reducing the volume of sales. The reason? Weather factor. In recent months, most areas in Indonesia including coal mine sites are still in under heavy rain though it was entering the dry season. The rainfall is clearly inhibits the production of coal, especially the drying process. As we know, the coal result from the excavation must be dried before it could be used as fuel, where the drying process will be so difficult if rainfall continues. As a result, the overall production process are blocked.
The performance declining in the coal sector, inevitably influence its stock price, although not all of them. Some of popular coal stocks are starting to weaken. ADRO, that some time before had steady at 2.000 to 2.100, now is beginning to fall into the position of 1.940. BUMI is also only capable to move on the 1.700's. What about BRAU? Contrary to the expectations of many observers (including me) who had estimated that BRAU will rise, BRAU was capable to rising for a moment only, then dragged by the weakening of the other coal stocks. When this article was written, BRAU stagnant at position 420, or only up 20 points from its initial price.
The good news is, although most of the coal company recorded a decrease in performance which impact on declining of its stock, but some of smaller coal companies were still able to record improved performance. An example is the Bayan Resources (BYAN) which reported an increased net profit by 45.1% in 1H10. As a result, BYAN now firmly in the position of 9.100, after at the end of June was still in the position of 6.200. That means BYAN had gained more than 40%! Although in valuation the price of 9.100 is too expensive, but because the performance BYAN in last 1H10 is like sticking alone in the midst of sector coal which declined, the stocks remain chaep psychologically, though of course the price at this time is prone to profit taking.
Then how about Harum Energy?
Like the other coal companies that experienced periods of glory in 2009, Harum Energy (HRUM) also recorded significant performance improvements in 2009, where its revenue increased 75% compared to 2008. Its net profit also rose to five times, or exactly 537%.
Unfortunately, HRUM is one of coal company which also recorded a decrease in performance in the year 2010. In 1Q10, HRUM record revenues of Rp 895 billion and net profit of Rp 134 billion . If these numbers are annualized, it will obtain revenue 3.6 trillion and net income of 536 billion for the full year 2010. When compared with 2009, which HRUM recorded revenues 4.6 trillion and net income of 768 billion, then the achievement of performance in 1Q10, is obviously not encouraging.
But what about the performance HRUM in 1H10? Who knows its better? HRUM performance in 1H10 is probably better than 1Q10, but if we look at the weather lately which is still not friendly, then the likelihood is small.
So, would HRUM in the end have fared just as BRAU? Before this conclusion, there is one more factor to consider:
We know that the coal sector is one of the investor's favorite sector in the IDX. The result is, usually the securities or the coal company itself will issued the 'powerful strategy' if the performance of this sector were fell, to attract investors to keep investing their funds in this sector and maintaining the liquidity of market. What is it? Playing with the future , of course (read more http://teguhidx.blogspot.com/2010/08/cara-mencermati-kabar-dari-emiten.html.) The performance of coal companies in 1Q10 and 1H10 are not so good, that's right. But what about the performance of the company in 2011 or 2012? Who knows it will increasing again as the year 2009, is not it?
And indeed that's what HRUM management do. HRUM announced that they expects the volume of coal production of 14.5 million tons in 2012, up nearly three times more than the realization of coal production in the year 2009, which is only 5.8 million tons (http://web.bisnis.com/sektor-riil/tambang-energi/1id207384.html.) For investors, such information may sound like as if the company has realized the coal production of 14.5 million tons (though not yet), so that they would be interested in buying its stocks.
Well the good news is, the stock price of coal is often influenced by positive sentiment like that. For example, PT Bukit Asam (PTBA). PTBA was also noted the decline in performance in 1H10, which its net income dropped 43.0%. But when this article was written, PTBA was firmly in position 18.450. Whereas on 24 August, PTBA was still in position 16.350. What happened? Apparently the relevant company just got a railroad construction project for purposes of transportation of coal (http://www.inilah.com/news/read/ekonomi/2010/08/25/769711/ptba-adani-global-pemda-sumsel-bangun-jalan-kereta-angkutan-batubara/.) The existence of the railway would facilitate the process of the company's production, so that the corporate's earnings in future will likely increase. As a result, the positive expectations of this news had boost PTBA of 12.8% in just a few days. Is PTBA performance in the future will actually increase as expected? Not necessarily.
Back to HRUM. When compared with BRAU, HRUM have better fundamentals because its debts are fewer (even though HRUM debts are also quite a lot). So the news of the production target in 2012 is likely to be responded positively by the market, (although the response might not be as good as the example of PTBA above, because the content of the news is different) so HRUM still have a chance to soar, maybe 10 - 20% on its first trading days, before then fall back or stagnant. Although the option to invest in HRUM is a bit speculative (because only rely on sentiment), but the risk is relatively smaller than if you buy BRAU.
But if your goal is for the long term, you should buy HRUM only if the weather during the dry season in Indonesia is back to normal. Moreover, the price of Rp 5,000 per share is expensive, especially if we look on the outlook of coal sector at this time.
Harum Energy
Rating of performance in 1Q10 : BB
Rating of stock price at 5.000 : BBB
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