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>Coal stronger for longer is making <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> a significant value investment with 40% of the market cap in cash and 2.5x PE FY22 after going ex-dividend. </li>
<li>The company continues to churn out 6-7% of the market cap in cash every month, with coal prices at Newcastle over 300$/ton (current spot at 350$/ton).</li>
<li>Paying out &gt;70% of its profits, the company trades at a 25% dividend yield at the very least, with a normalized yield of 10% at a 130-150$/ton coal price. </li>
</ul>


Coal stronger for longer is making Indo Tambangraya Megah (ITMG IJ) a significant value investment with 40% of the market cap in cash and 2.5x PE FY22 after going ex-dividend. 
The company continues to churn out 6-7% of the market cap in cash every month, with coal prices at Newcastle over 300$/ton (current spot at 350$/ton).
Paying out &gt;70% of its profits, the company trades at a 25% dividend yield at the very least, with a normalized yield of 10% at a 130-150$/ton coal price. 


ITMG Q3 2022: 25% FY22 Dividend Yield 40% of Mkt Cap in Cash, Coal Stronger For Longer

Alamtri Resources Indonesia / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/adaro-energy-tbk-pt" target="_blank" data-smartkarma-citation="entities:6061:1" rel="noopener">Adaro Energy (ADRO IJ)</a> showed a sequential decline in earnings owing to a 6.8% QoQ decrease in pricing as discounts for their coal continued to build Vs. Newcastle.</li>
<li>While the stock trades at a 2.8x FY22 PE and 1.3x EV-EBTIDA FY22E with a 21% dividend yield, the market is pricing in a substantial decline in coal prices.</li>
<li>Adaro offers a significant margin of safety with 25% of the market cap in cash and decent capital allocation, but we prefer ITMG for its superior grades.</li>
</ul>



Adaro Energy (ADRO IJ) showed a sequential decline in earnings owing to a 6.8% QoQ decrease in pricing as discounts for their coal continued to build Vs. Newcastle.
While the stock trades at a 2.8x FY22 PE and 1.3x EV-EBTIDA FY22E with a 21% dividend yield, the market is pricing in a substantial decline in coal prices.
Adaro offers a significant margin of safety with 25% of the market cap in cash and decent capital allocation, but we prefer ITMG for its superior grades.


<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 strong Q2 2022, with profits of 247 mn USD up 225% YoY, and coal prices averaging 202 USD/ton for the quarter (inline). </li>
<li>The only disappointment was volumes which came in at 3.9 mn tons, down 20.5% YoY. The company guided sequential improvement in coal production for Q3 2022 to 4.6 mn tons. </li>
<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> is 2.6x PE FY22e, with 28% of its market capitalization in cash and a dividend yield of 28% based on a 70% payout ratio.</li>
</ul>



Indo Tambangraya Megah (ITMG IJ) reported strong Q2 2022, with profits of 247 mn USD up 225% YoY, and coal prices averaging 202 USD/ton for the quarter (inline). 
The only disappointment was volumes which came in at 3.9 mn tons, down 20.5% YoY. The company guided sequential improvement in coal production for Q3 2022 to 4.6 mn tons. 

Indo Tambangraya Megah (ITMG IJ) is 2.6x PE FY22e, with 28% of its market capitalization in cash and a dividend yield of 28% based on a 70% payout ratio.


ITMG - Insights from the Q2 2022 Presentation

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>There are 3 changes each for the IDX30 Index and LQ45 Index and 11 changes for the IDX80 Index at the upcoming rebalance to be implemented on 29 July.</li>
<li>There is passive inflow on <a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago Tbk PT (ARTO)</a> due to index inclusion, and on <a href="https://www.smartkarma.com/entities/bank-rakyat-indonesia-persero" target="_blank" data-smartkarma-citation="entities:484:1" rel="noopener">Bank Rakyat Indonesia (BBRI)</a> and <a href="https://www.smartkarma.com/entities/bank-central-asia-tbk-pt" target="_blank" data-smartkarma-citation="entities:440:1" rel="noopener">Bank Central Asia (BBCA)</a> due to capping changes.</li>
<li>With only 4 days to implementation, there will be relatively big moves on stocks that have large flow/impact from passive fund trading.</li>
</ul>


There are 3 changes each for the IDX30 Index and LQ45 Index and 11 changes for the IDX80 Index at the upcoming rebalance to be implemented on 29 July.
There is passive inflow on Bank Jago Tbk PT (ARTO) due to index inclusion, and on Bank Rakyat Indonesia (BBRI) and Bank Central Asia (BBCA) due to capping changes.
With only 4 days to implementation, there will be relatively big moves on stocks that have large flow/impact from passive fund trading.


IDX30/​LQ45 Index Rebalance: Big Inflows on ARTO, BBRI, BBCA; Outflows on GOTO, TLKM, BMRI

<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> is a 2.3 bn USD company with ~880 mn USD net cash adding &gt;100 mn USD of free cash flow a month.</li>
<li>At a 103 USD/ton ASP the company made a 475 mn USD profit for 2021. We estimate prices are easily around 200 USD/ton for the company in the current environment.</li>
<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> has a track record of paying &gt;70% of its profits as dividends since 2009 ( implying a yield of 37% for FY22 ). </li>
</ul>



Indo Tambangraya Megah (ITMG IJ) is a 2.3 bn USD company with ~880 mn USD net cash adding &gt;100 mn USD of free cash flow a month.
At a 103 USD/ton ASP the company made a 475 mn USD profit for 2021. We estimate prices are easily around 200 USD/ton for the company in the current environment.

Indo Tambangraya Megah (ITMG IJ) has a track record of paying &gt;70% of its profits as dividends since 2009 ( implying a yield of 37% for FY22 ). 


Indonesia

Indo Tambangraya Megah engages in coal mining and energy activities, producing thermal coal for power plants. The company is also involved in coal trading, fuel trading, energy marketing, electricity generation, mining contractor services, and solar rooftop installations. It was founded in 1987 and is headquartered in South Jakarta, Indonesia.

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Indo Tambangraya Megah (ITMG IJ)

ITMG Q3 2022: 25% FY22 Dividend Yield 40% of Mkt Cap in Cash, Coal Stronger For Longer

Coal stronger for longer is making Indo Tambangraya Megah (ITMG IJ) a significant value investment with 40% of the market cap in cash a 25%...

Sameer Taneja

ADARO Solid 3Q 2022 : But Prefer ITMG

Adaro stock trades at a 2.8x FY22 PE and 1.3x EV-EBTIDA FY22E with a 21% dividend yield, the market is pricing in a substantial decline in coal...

Sameer Taneja

ITMG - Insights from the Q2 2022 Presentation

Indo Tambangraya Megah (ITMG IJ) is an Indonesian coal producer with a 2.6x PE FY22e, with 28% of its market capitalization in cash and a dividend...

Sameer Taneja

IDX30/LQ45 Index Rebalance: Big Inflows on ARTO, BBRI, BBCA; Outflows on GOTO, TLKM, BMRI

There are 3 changes each for the IDX30 and LQ45 indices that will be implemented on 29 July. The largest passive inflows are on BBRI, ARTO and...

Brian Freitas

A Layman's Thesis for ITMG

Trading at 1.9x PE FY22e with a 37% implied dividend yield on a payout ratio of 70% with 28% of its market cap in cash post outstanding dividend...

Sameer Taneja

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ITMG Q3 2022: 25% FY22 Dividend Yield 40% of Mkt Cap in Cash, Coal Stronger For Longer

Coal stronger for longer is making Indo Tambangraya Megah (ITMG IJ) a significant value investment with 40% of the market cap in cash a 25%...

Sameer Taneja

ADARO Solid 3Q 2022 : But Prefer ITMG

Adaro stock trades at a 2.8x FY22 PE and 1.3x EV-EBTIDA FY22E with a 21% dividend yield, the market is pricing in a substantial decline in coal...

Sameer Taneja

ITMG - Insights from the Q2 2022 Presentation

Indo Tambangraya Megah (ITMG IJ) is an Indonesian coal producer with a 2.6x PE FY22e, with 28% of its market capitalization in cash and a dividend...

Sameer Taneja

IDX30/​LQ45 Index Rebalance: Big Inflows on ARTO, BBRI, BBCA; Outflows on GOTO, TLKM, BMRI

There are 3 changes each for the IDX30 and LQ45 indices that will be implemented on 29 July. The largest passive inflows are on BBRI, ARTO and...

Brian Freitas

A Layman's Thesis for ITMG

Trading at 1.9x PE FY22e with a 37% implied dividend yield on a payout ratio of 70% with 28% of its market cap in cash post outstanding dividend...

Sameer Taneja

IDX30/LQ45 Index Rebalance: Big Inflows on ARTO, BBRI, BBCA; Outflows on GOTO, TLKM, BMRI