Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

Indo Tambangraya Megah / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/indo-tambangraya-megah-tbk-p" target="_blank" data-smartkarma-citation="entities:15891:1" rel="noopener">Indo Tambangraya Megah (ITMG IJ)</a> provides investors with fat dividends. We estimate from 2021-2023e, the company will have paid over 20,000 Rph (70% of the current share price) in dividends.</li>
<li>Despite these dividend payouts, cash on the balance sheet by the end of FY23e will easily exceed one bn USD or about 50% of the market capitalization.</li>
<li>Weak results/degrowth are expected due to unsustainably high coal prices in 2022. Nevertheless, there is a good case for future value as hefty dividends will continue to be paid.</li>
</ul>



Indo Tambangraya Megah (ITMG IJ) provides investors with fat dividends. We estimate from 2021-2023e, the company will have paid over 20,000 Rph (70% of the current share price) in dividends.
Despite these dividend payouts, cash on the balance sheet by the end of FY23e will easily exceed one bn USD or about 50% of the market capitalization.
Weak results/degrowth are expected due to unsustainably high coal prices in 2022. Nevertheless, there is a good case for future value as hefty dividends will continue to be paid.


ITMG Q2 2023 Weak But Stock At 20% Dividend Yield with ~50% of Mkt Cap In Cash

<ul>
<li>We expect a 10,000-12,000 Rph dividend for FY22 (div yield 28%-33%) from <a href="https://www.smartkarma.com/entities/indo-tambangraya-megah-tbk-p" target="_blank" data-smartkarma-citation="entities:15891:1" rel="noopener">Indo Tambangraya Megah (ITMG IJ)</a> as earnings are set to improve &gt;70% HoH (H1 dividend - 4128 Rph/share).</li>
<li>With coal prices remaining elevated, if volumes remain flat YoY, we could see &gt;50% of the stock price returned in dividends throughout FY22e/23e.</li>
<li>There is an excellent margin of safety, with almost 40% of the market capitalization in net cash. With a &gt;65% payout ratio, we will see cash levels build further. </li>
</ul>


We expect a 10,000-12,000 Rph dividend for FY22 (div yield 28%-33%) from Indo Tambangraya Megah (ITMG IJ) as earnings are set to improve &gt;70% HoH (H1 dividend - 4128 Rph/share).
With coal prices remaining elevated, if volumes remain flat YoY, we could see &gt;50% of the stock price returned in dividends throughout FY22e/23e.
There is an excellent margin of safety, with almost 40% of the market capitalization in net cash. With a &gt;65% payout ratio, we will see cash levels build further. 


ITMG - Div Yield >28%, Net Cash 40% of Mkt Cap, Deep Value with High Coal Price

<ul>
<li>
<a href="https://www.smartkarma.com/entities/indo-tambangraya-megah-tbk-p" target="_blank" data-smartkarma-citation="entities:15891:1" rel="noopener">Indo Tambangraya Megah (ITMG IJ)</a>  reported FY24 revenues of $2.3 billion and profits of $374 million, reflecting declines of 3% and 25%, respectively, consistent with expectations amid lower coal prices.</li>
<li>The company will encounter higher costs in FY25 as the B40 biodiesel mandate takes effect. This is expected to put pressure on margins for all coal producers.</li>
<li>Alongside declining coal prices, we anticipate profits will fall to $250-300 million. This positions the stock at an FY25 PE of 5- 6.5x with a 12-13% dividend yield.</li>
</ul>



Indo Tambangraya Megah (ITMG IJ)  reported FY24 revenues of $2.3 billion and profits of $374 million, reflecting declines of 3% and 25%, respectively, consistent with expectations amid lower coal prices.
The company will encounter higher costs in FY25 as the B40 biodiesel mandate takes effect. This is expected to put pressure on margins for all coal producers.
Alongside declining coal prices, we anticipate profits will fall to $250-300 million. This positions the stock at an FY25 PE of 5- 6.5x with a 12-13% dividend yield.


ITMG IJ Q4 FY24: Coal Price Decline Squeezes Margins, FY25 Costs To Increase

<ul>
<li>
<a href="https://www.smartkarma.com/entities/indo-tambangraya-megah-tbk-p" target="_blank" data-smartkarma-citation="entities:15891:1" rel="noopener">Indo Tambangraya Megah (ITMG IJ)</a> recently had a decent move when it reported strong 3Q 2024 earnings in November. Despite that, it trades at a 12% dividend yield (65% payout).</li>
<li>In our last<a href="https://www.smartkarma.com/insights/itmg-ij-steady-coal-prices-mine-life-upgrade-43-of-the-mkt-cap-in-cash-and-11-dividend-yield" target="_blank" rel="noopener"> insight</a>, we flagged an increase in mine life to 19 years (vs 14 years), further clarifying high-margin cash flows for longer. </li>
<li>The company has 926 mn USD in net cash, ~50% of its market capitalization, and is trading at 5.5x PE (assuming 350 mn USD profits vs. 9MFY24 273 mn USD).</li>
</ul>



Indo Tambangraya Megah (ITMG IJ) recently had a decent move when it reported strong 3Q 2024 earnings in November. Despite that, it trades at a 12% dividend yield (65% payout).
In our last insight, we flagged an increase in mine life to 19 years (vs 14 years), further clarifying high-margin cash flows for longer. 
The company has 926 mn USD in net cash, ~50% of its market capitalization, and is trading at 5.5x PE (assuming 350 mn USD profits vs. 9MFY24 273 mn USD).


Indo Tambangraya Megah (ITMG IJ): 50% of Mkt Cap in Cash, 12% Yield

<ul>
<li>The pivot in capital allocation plans of <a href="https://www.smartkarma.com/entities/whitehaven-coal-ltd" target="_blank" data-smartkarma-citation="entities:14253:1" rel="noopener">Whitehaven Coal (WHC AU)</a> by suspending its buyback program (up to 25% of outstanding shares) is a big negative for us. </li>
<li>We think the increase in capex spending in a frothy pricing environment and focus on M&amp;A for spending the 2.6 bn of cash is a coin toss on capital allocation. </li>
<li>We prefer names that keep their capital allocation plans consistent, e.g., <a href="https://www.smartkarma.com/entities/indo-tambangraya-megah-tbk-p" target="_blank" data-smartkarma-citation="entities:15891:1" rel="noopener">Indo Tambangraya Megah (ITMG IJ)</a>, and would take money off the table here.</li>
</ul>


The pivot in capital allocation plans of Whitehaven Coal (WHC AU) by suspending its buyback program (up to 25% of outstanding shares) is a big negative for us. 
We think the increase in capex spending in a frothy pricing environment and focus on M&amp;A for spending the 2.6 bn of cash is a coin toss on capital allocation. 
We prefer names that keep their capital allocation plans consistent, e.g., Indo Tambangraya Megah (ITMG IJ), and would take money off the table here.


Whitehaven Coal Suspension of Buyback: A Negative Despite Rising Coal Price/ Potential Acquisition

Indonesia

PT Indo Tambangraya Megah Tbk operates as a coal exploration and mining company that provides energy and electricity support. The Company operates in Indonesia and supplies coal to the world energy market.

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Indo Tambangraya Megah (ITMG IJ)

ITMG Q2 2023 Weak But Stock At 20% Dividend Yield with ~50% of Mkt Cap In Cash

ITMG declared a dividend of 2,660 Rph/share ( implying a dividend of 9% semi-annually or 18% annualized on the close price of September 1st). With...

Sameer Taneja

ITMG - Div Yield >28%, Net Cash 40% of Mkt Cap, Deep Value with High Coal Price

We expect a 10,000-12,000 Rph dividend for FY22 (div yield 28%-33%) from Indo Tambangraya Megah (ITMG IJ) as earnings are set to improve >70% HoH...

Sameer Taneja

ITMG IJ Q4 FY24: Coal Price Decline Squeezes Margins, FY25 Costs To Increase

We summarize the FY24 results for ITMG IJ. With 58% of the market capitalization in cash and 15% trailing dividend yield, there is enormous value,...

Sameer Taneja