Straits Asia Resources downgraded to 'hold' by OCBC

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 2.99

OCBC Investment Research in a July 29 research report says: "Straits Asia Resources (SAR) reported 2Q11 revenue rising 17.9% y-o-y (+5.7% q-o-q) to US$225.8 million, aided by higher ASPs (US$94.60/ton, +31.1% y-o-y/+15.1% q-o-q); although sales volume dipped slightly to 2478 tons (-13.3% y-o-y/-7.5% q-o-q).

"For 1H11, revenue grew 27% to US$439.5 million, meeting 47% of our FY2011 forecast, while net profit surged 133% to US$80.3 million, meeting 53% of full-year estimate. SAR also proposed an interim dividend of 4.24 US cents.

"Although we modestly raised our FY2011 estimates by 0.9-1.5%, which in turn bumps up our DCF-based fair value from $2.91 to $2.99, we note that most of the positives may have already been captured in the share price. DOWNGRADE TO HOLD."

Macquarie raises Straits Asia to $3.80, keeps outperform

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: MacQuarie

Macquarie has raised its target price on Singapore-listed coal miner Straits Asia Resources (STRL.SI) to $3.80 from $3.40 and maintained its outperform rating.

Straits Asia said last week that Indonesia’s minister of forestry has issued a borrow and use license to the firm for the Northern Leases at the Sebuku mines, allowing it to begin mining work.

Macquarie said it believes the approval will lead Straits Asia to be the proxy of the ASEAN coal sector given the production size, improving governance, decent liquidity and attractive valuation.

The brokerage has increased its 2011 coal production estimate for Straits Asia to 12 megatonnes (MT) from 11.5 MT and it expects an additional 50-60 MT of reserves, on top of the current reserves of around 130 MT, with more upside upon successful exploration.

Straits Asia produced 10.6 MT of coal in the whole of 2010.

The Sebuku mines have better coal quality, which could lead to higher selling prices, as well as lower production costs, Macquarie said. Sebuku coal is one of Indonesia’s highest grades of thermal coal, according to Straits Asia.

At 10:38 a.m., Straits Asia shares were down 3.1% at $2.79 on a volume of 3.5 million shares.

Straits Asia Resources surges after receiving mining license

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: DMG

Shares of Singapore-listed coal miner Straits Asia Resources (STRL.SI) jumped as much as 7.9% on Thursday to a 33-month high after it said it was issued a license to mine in Indonesia.

At 9:06 a.m., shares of Straits Asia were 5.8% higher at $2.94 with over 3.6 million shares changing hands.

Straits Asia said Indonesia's minister of forestry has issued a borrow and use license to the firm for the Northern Leases at the Sebuku mines, allowing it to begin mining work.

DMG & Partners said this permit will provide support for Straits Asia to ramp up production at the Sebuku mines in Indonesia.

"We believe this is a key catalyst that investors have been looking out for and expect some positive share price movement in the short term," said DMG in a report. It has a buy rating and target price of $3.08 on the firm.

Straits Asia falls on Goldman report

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: Golman Sachs

Shares of Singapore-listed coal miner Straits Asia Resources (STRL.SI) fell as much as 3.9% on Tuesday after Goldman Sachs added the firm to its conviction sell list and said market expectations for it were too high, traders said.

At 10:18 a.m., Straits Asia Resources shares were 2.4% lower at $2.48 with over 2.2 million shares changing hands.

Goldman said that for every 5% fall in benchmark coal prices, Straits Asia's earnings could be reduced by 11% this year and by 22% next year.

“Straits Asia is the most sensitive stock to a fall in coal prices versus its ASEAN peers,” the brokerage said, noting that the firm is the most expensive thermal coal stock in the world, trading at 19.8 times its price-earnings ratio for this year.

Goldman has a sell rating on the stock with a target price of $2.00.

Straits Asia Resources rated 'buy' by OCBC

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: OCBC

OCBC Investment Research in an Apr 6 research report says: "Straits Asia Resources (SAR), being a pureplay thermal coal miner, stands to benefit from coal price inflation. We have raised our FY2011 ASP assumption from US$82.50 per ton to US$90 per ton and lift our FY2011 net profit estimate by 28% to US$150 million amid the favourable operating backdrop.

Read more...

OCBC ups target on Straits Asia to $2.91; keeps buy

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: OCBC

OCBC Investment Research has raised its target price on Singapore coal miner Straits Asia Resources (STRL.SI) to $2.91 from $2.74 and maintained its buy rating.

OCBC had raised its estimate on the average selling price of coal to US$90 ($113) per tonne from US$82.50 per ton for Straits Asia's 2011 financial year, helped by strong demand in Asia and supply disruptions in Australia following floods earlier this year.

The brokerage said it increased its 2011 net profit forecast by 28% to US$150 million as Straits Asia, being a pure-play thermal coal miner, stands to benefit from rising coal prices.

In the aftermath of Japan's recent nuclear incident, growing aversion towards nuclear energy may fuel demand for alternative energy resources including thermal coal in the long run, OCBC added.

However, it said a key near term risk is the escalating price of oil as a result of the continued uncertainty in the Middle East. Fuel accounts for 30-35% of Straits Asia's production costs, OCBC said.

But the brokerage said the increase in average selling prices should more than offset the cost pressures, signalling stronger profit margins.

At 9:40 a.m., Straits Asia shares were up 1.15% at $2.63 on a volume of 820,000 shares.


 

Goldman Sachs downgrades Straits Asia Resources to Sell on rich valuations

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: Golman Sachs

Goldman Sachs downgrades Straits Asia Resources (AJ1.SG) to Sell from Neutral, cuts its target to $2.00 from $2.30, citing rich valuations, while market expectations appear too high.

“Our 2011E-2012E net profit estimates are 31%-37% below Bloomberg consensus driven by lower ASPs (in line with company guidance) and higher costs. Even if we assume a higher ASP of US$90 ($114.8)/ton (guidance is US$80-US$85), our analysis implies consensus downside risk to EBITDA of 7.0%.” 

It lowers its 2011-2013 net profit estimates by 16%-17% on high costs, driven by stronger inflation and higher strip ratio for Jembayan mine (11.3X vs 10X previously). 

“With lower earnings, SAR screens as one of the most expensive stocks globally on EV/EBITDA and overvalued versus cash returns.” It notes the new loader in Jembayan is expected to commission soon but ramp up to full capacity may take time (expected 4Q11), so costs in 2011 may remain high as a large part of volumes may be supported by temporary loading facilities.

Shares are flat at $2.46. 

IIFL starts Straits Asia Resources at Buy

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: IIFL

IIFL starts Straits Asia Resources (AJ1.SG) at Buy with a $3.55 target price (54% upside). It says the company is a coal pure-play and is a good proxy to underlying benchmark coal prices: “in-line with rising demand for seaborne coal and strong benchmark coal prices, we expect SAR to deliver 66% earnings CAGR during FY11-FY13,” driven by 16% CAGR in coal production (from 10.5mt in FY10 to 16.5mt in FY13); 8.0% CAGR in average sales price (from US$72.8 ($92.4)/tonne in FY10 to US$94/tonne in FY13); and 700bps expansion in net margin between FY11-FY13 driven by strong cost control. 

It notes the stock currently trades at 6.4X FY11 and 4.2X FY12 EV/EBITDA. The house says its 16% coal production CAGR assumes production at the Northern Leases to start by 3QFY11; “Sebuku will experience economies of scale, due to the ramp up of production at Northern Leases, and Jembayan will benefit from the installation of the new loader in April 2011.” 

Shares are up 0.8% at $2.43.

Straits Asia Resources down 1.2%; worst over - OCBC

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: OCBC

Straits Asia Resources (AJ1.SG) is down 1.2% at $2.39, in line with broader market weakness, after it posts 4Q revenue down 11.1% on year to US$207.3 million with net profit down 19.7% on year to US$30.5 million ($39 million), though sequentially both measures grew 12.5% and 31.5% respectively.

OCBC, which has a Buy rating but lowers its fair value to $2.74 from $2.89 (on lower USD/SGD), says FY10 earnings of US$88.2 million beat its forecast and consensus. 

“SAR has successfully navigated through what we view was a challenging 2010 with multiple headwinds ranging from falling thermal coal prices to higher production costs. We believe that the worst is over, as evidenced in the group’s sequential improvement in performance over the past two quarters. While we expect high production costs to persist owing to Indonesia’s inflation and climbing fuel costs, these should be offset by an increase in thermal coal prices coupled with higher production volumes.” 

OCBC expects the final permit for Northern Leases to be granted by 2Q11. The orderbook tips good support at current levels.

Straits Asia Resources upgraded to 'neutral' by DMG

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: DMG

DMG & Partners Securities in a Feb 22 research report says: "Straits Asia Resources (SAR) reported 4Q10 net profit of US$30.5 million (-20% y-o-y, +32% q-o-q), 20% above our expectations and consensus'. This was mainly due to higher-than-expected production from Jembayan in 4Q10.

Read more...

StraitsAsia - Straits Asia donwgraded to 'sell' from 'neutral' by DMG

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: DMG

DMG & Partners has downgraded Singapore-listed coal miner Straits Asia Resources (STRL.SI) to “sell” from”neutral” but maintained its target price of $2.49.



DMG has cut its rating for Straits Asia Resources as it said it believes the firm’s share price has over-run following the issuance for a coal mining license in Indonesia and the recent surge in coal prices.

“We think coal prices will fall as coal output recovery in Queensland is expected to take place as soon as three months,” said DMG in a report.



However, DMG raised its 2011 earnings per share estimate by 6% to reflect a higher quarter of higher coal prices.



Shares of Straits Asia Resources have risen more than 15% since the end of last year to close at $2.88 on Wednesday.





 

StraitsAsia - Straits Asia +7.6% on long-awaited mine permit

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: OCBC

Straits Asia (AJ1.SG) is up 7.6% at $2.84 on news of its Northern Leases Principle License, with investors likely anticipating a possible earnings upgrades for FY11 as some analysts had pushed back contribution assumptions from increased Sebuku production due to delays in obtaining the license. 

Also, with the Queensland flooding highlighting mining risks from adverse weather, investors may be taking comfort that SAR’s production will become more resilient with the addition of Northern Leases after it mentioned in its 3Q results the effects of weather at Sebuku were more severe because operations were confined to the single Tanah Putih pit. 

OCBC, which has a Buy call with $2.89 fair value, says “the Pinjam Pakai permit is typically issued approximately three months after the Principle License is granted, implying that SAR will probably be able to start mining at the Northern Leases by 2Q11-3Q11.”

The house leaves its FY11 estimates unchanged as it had factored in Northern Leases production from 2H11. The orderbook suggests a $2.90 cap.

StraitsAsia - Straits Asia Resources lowered to Fair Value by OCBC

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: OCBC

OCBC lowers Straits Asia Resources (AJ1.SG) fair value estimate to $2.89 from $3.13; it says while SAR is a beneficiary of strengthening coal prices, “we caution against over exuberance as oil prices have also been climbing, and this could crimp the group’s profit margins given that fuel costs account for 30%-35% of its production costs.”

The house raises its cost estimates to allow for higher fuel costs, also trims production forecasts in the absence of updates regarding the group’s Pinjam Pakai mining permits, which were previously expected by end-2010.



Nevertheless, OCBC keeps its Buy rating, “as we expect SAR’s FY11 earnings to improve over FY10. In addition, structural shortages in physical coal supplies should boost sentiment surrounding coal producers whose operations are less affected by adverse weather conditions.” Shares are flat at $2.59.

StraitsAsia - Nomura cuts Straits Asia Resources to reduce

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: Nomura

Nomura downgrades Straits Asia Resources (AJ1.SG) to Reduce from Buy, cuts target to $2.21 from $2.80 after lowering FY11, FY12 earnings estimates by 27%, 10% respectively to reflect lower volumes from Sebuku mine, higher costs next year.

“We believe the market is ignoring operational risks - both on volumes and margins (cost increase on oil) - and there exists significant downside risks to street estimates and valuations,” says house. 

Adds, even if Indonesia-based coal miner gets regulatory approval for work on Sebuku mine over next 2-3 months, it won’t be able to mine significant volumes from Northern leases area in FY11. 

Says recent price rally driven more by optimism than fundamentals; “Northern leases permits remain a moving target, and we’re building in another few months delay.” 

Shares flat at $2.75. 

StraitsAsia - Nomura reaffirms Straits Asia at Buy; laggard play

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: Nomura

Nomura reaffirms Straits Asia Resources (AJ1.SG) at Buy with $2.80 target price after 3Q profit after tax at US$23 million, topping house's estimate by 10%, mostly on lower tax rate (31%). 



Tips around US$80 million ($103.1 million)PAT for FY10; says stock attractively valued, laggard play, has underperformed peers by 30% year-to-date; notes strong volumes at Jembayan mine, while costs, tax have come down. 

Expects delay in Northern Leases mine permit, but says any positive surprise there would substantially impact FY11 forecasts, as expects mine to be high margin production; expects volume uptick from further reserve upgrades at Jembayan, Northern Leases while M&A would still be key catalyst; “even if there is no acquisition, with a 60% dividend payout ratio, we estimate its dividend yield will be 5% in FY11F and 7% in FY12F - much higher than regional peers.” 

Shares off 0.4% at $2.31.

StraitsAsia - Straits Asia started at Buy by Nomura with $2.80 target

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: Nomura

Nomura starts Straits Asia Resources (AJ1.SG) at Buy with $2.80 target price, says Dow Jones.



Nomura says strong coal prices, pick-up in coal volumes should lead to earnings upturn, possible stock re-rating for Indonesia-based miner.



“We expect Straits Asia’s coal sales volumes to almost double over the next five years, driven by production increases at Jembayan mines and a strong ramp-up at Northern leases,” says research house.

Notes SAR generates strong operating cashflow that can be used to fund acquisitions. Says even if there’s no acquisition, dividend yield still attractive at estimated 5.8% for FY11, 8.3% for FY12, based on 60% dividend payout ratio. Shares –0.4% at $2.29 yesterday.

StraitsAsia - Straits Asia Resources target raised to $2.08 by OCBC

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: OCBC

OCBC Investment Research lifts Straits Asia Resources (AJ1.SG) target price to $2.08 from $1.85 to assume higher average selling prices from FY11 on strong demand, says Dow Jones.



But keeps Hold call: “While SAR’s outlook is gradually improving, lingering risks including wet weather as well as potential delays in obtaining the Sebuku permits remain.”



Notes, Indonesia-based coal miner expects to receive permits by end-2010 to carry out work in Sebuku region. Shares +1.0% at $2.06.

StraitsAsia - Straits Asia Resources target raised to $2.08 by OCBC

Stock Name: StraitsAsia
Company Name: STRAITS ASIA RESOURCES LIMITED
Research House: OCBC

OCBC Investment Research lifts Straits Asia Resources (AJ1.SG) target price to $2.08 from $1.85 to assume higher average selling prices from FY11 on strong demand, says Dow Jones.



But keeps Hold call: “While SAR’s outlook is gradually improving, lingering risks including wet weather as well as potential delays in obtaining the Sebuku permits remain.”



Notes, Indonesia-based coal miner expects to receive permits by end-2010 to carry out work in Sebuku region. Shares +1.0% at $2.06.