Sakari Resources posted 3Q12 revenue of US$270.4m, +21% YoY and 14% QoQ, aided by higher production at both its mines at Sebuku and Jembayan. Despite the lower coal ASPs, better efficiency led to an improvement in operating margins; but it was a tax credit of US$31m which led to its net profit jumping 52% YoY and 135% QoQ to US$56.3m. However, if we strip out the tax credit, we estimate that core earnings would have come in at around US$25.3m, or down 32% YoY (+6% QoQ). Separately, PTT has increased its stake to 90.2% by the end of the offer on 22 Oct. However, PTT has not acquired sufficient shares and acceptances to enable it to proceed with a compulsory acquisition of the remaining shares. But in light of the reduced liquidity, we are ceasing coverage on the company.
3Q12 earnings boosted by tax credit
Sakari Resources posted 3Q12 revenue of US$270.4m, +21% YoY and 14% QoQ, aided by higher production at both its mines at Sebuku and Jembayan. Despite the lower coal ASPs (US$83.7/ton versus US$94.5 in 2Q12), better efficiency (lower cash cost) led to an improvement in operating margins; but it was a tax credit of US$31m which led to its net profit jumping 52% YoY and 135% QoQ to US$56.3m. However, if we strip out the tax credit, we estimate that core earnings would have come in at around US$25.3m, or down 32% YoY (+6% QoQ). 9M12 revenue came in at US$697.2m, meeting 75% of our FY12 forecast, while core net profit would be around US$63.7m, or 74% of full-year estimate.
Near-term outlook remains muted
Although both its mines are on track to hit their production targets this year, management notes that the near-term coal sentiment remains weak as global growth forecasts are revised down. Supply is also moderating significantly at this time as most coal mining operations have curtailed production in response to stagnant demand and weaker pricing levels. As a guide, international coal prices fell 7% QoQ in 3Q12. Nevertheless, Sakari will continue to target improvements in both its operating performance and coal control measures to maximize margins in the current tough pricing conditions.
PTTML has 90.2% stake in Sakari Resources
Separately, PTTML (PTT Mining Limited) has increased its stake to 90.2% by the end of the offer on 22 Oct. However, PTT has not acquired sufficient shares and acceptances to enable it to proceed with a compulsory acquisition of the remaining shares. As such, the company notes that PTT is still evaluating its position and has not made any decision to lift the suspension of trading in Sakari shares.
Ceasing coverage
But in light of the reduced liquidity (free float in the market), we are ceasing coverage of the company.
Sakari Resources posted 3Q12 revenue of US$270.4m, +21% YoY and 14% QoQ, aided by higher production at both its mines at Sebuku and Jembayan. Despite the lower coal ASPs (US$83.7/ton versus US$94.5 in 2Q12), better efficiency (lower cash cost) led to an improvement in operating margins; but it was a tax credit of US$31m which led to its net profit jumping 52% YoY and 135% QoQ to US$56.3m. However, if we strip out the tax credit, we estimate that core earnings would have come in at around US$25.3m, or down 32% YoY (+6% QoQ). 9M12 revenue came in at US$697.2m, meeting 75% of our FY12 forecast, while core net profit would be around US$63.7m, or 74% of full-year estimate.
Near-term outlook remains muted
Although both its mines are on track to hit their production targets this year, management notes that the near-term coal sentiment remains weak as global growth forecasts are revised down. Supply is also moderating significantly at this time as most coal mining operations have curtailed production in response to stagnant demand and weaker pricing levels. As a guide, international coal prices fell 7% QoQ in 3Q12. Nevertheless, Sakari will continue to target improvements in both its operating performance and coal control measures to maximize margins in the current tough pricing conditions.
PTTML has 90.2% stake in Sakari Resources
Separately, PTTML (PTT Mining Limited) has increased its stake to 90.2% by the end of the offer on 22 Oct. However, PTT has not acquired sufficient shares and acceptances to enable it to proceed with a compulsory acquisition of the remaining shares. As such, the company notes that PTT is still evaluating its position and has not made any decision to lift the suspension of trading in Sakari shares.
Ceasing coverage
But in light of the reduced liquidity (free float in the market), we are ceasing coverage of the company.
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