Sakari Resources

DMG Research on 31 July 2012

Q2 2012 profit after tax and minority interests was down 39 per cent yoy to US$24 million on the back of 0.2 per cent y-o-y decline in top-line to US$238 million, further dragged down by an 8 per cent y-o-y increase in cost of sales to US$183 million and a 60 per cent y-o-y increase in tax (though this includes a one-off US$4.2 million for prior years' taxes) to US$23 million. Other gains of US$8.3 million in Q2 2012 helped offset the decline. Management was to hold a results conference call on July 31, during which revisions on guidance could be made. We maintain our "buy" rating and target price of $2.00 based on 15.5 times FY2012 PE. An interim dividend of two US cents per share has been declared.

Sebuku's production was strong in Q2 2012, with production up 138 per cent y-o-y to 672Kt. Cash costs were down 23 per cent y-o-y to US$42.70 per tonne. With H1 2012 production accounting for 48 per cent of our FY2012 forecast of 2.5 million tonnes, we see strong possibility of Sebuku beating our production forecasts.

Jembayan's production was down 12 per cent y-o-y to 2,069Kt. H1 2012 production now accounts for 39 per cent of our FY2012 estimate. We continue to expect Jembayan to experience sequential ramp-up in volumes. What was notable was that Jembayan's cash costs were down 15 per cent q-o-q to US$57.6 per tonne.
BUY