February 4, 2013 / 7:01 AM / 4 years ago

STOCKS NEWS INDONESIA-Citi cuts Adaro Energy to 'neutral'

3 Min Read

Citi Research downgraded PT Adaro Energy Tbk to 'neutral' from 'buy' while keeping its target price at 1,650 rupiah, after the stock rose 20 percent from recent lows, having moved with the recovery in seaborne coal prices from November.

"We think this is fair relative to historical trading ranges and given our view that coal fundamentals will recover modestly in 2013. We expect the shares to consolidate near current levels until the market has more conviction in demand growth," Citi said in a note on Monday.

Development of the coal miner's projects in South Sumatra and East Kalimantan appear to be deliberately slow and measured, which is reasonable given current market uncertainties, the note said.

"Overburden crush and convey system is now around 96 percent complete and is expected to reduce costs by $50 million annually. The expansion of the Kelanis river terminal to 70 million tonnes from 55 million tonnes is expected to be complete in early 2013."

In a filing with stock exchanges, Adaro on Friday said its fourth-quarter production was 13.3 million tonnes while sales stood at 14 million tonnes.

Shares of the coal firm were up 1.22 percent at 1,660 rupiah. The broader index was up 0.08 percent.

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(Reporting by Andjarsari Paramaditha in Jakarta, Editing by Sunil Nair) **************************************************************** 11:35 STOCKS NEWS INDONESIA-UBS cuts Garuda Indonesia's target price UBS Investment Research lowered its target price on Indonesia's national flag carrier PT Garuda Indonesia Tbk to 740 rupiah from 815, while keeping its 'neutral' rating, saying intense competition in the low-end segment depresses earnings and the company may not have the financial strength to expand into the full-service segment.

"Our demand/supply model suggests Indonesia will face rising overcapacity in 2014. We expect the majority of new capacity to come from LCCs. Garuda's dual-brand strategy allows it to compete with LCCs using the Citilink brand and dominate the premium segment with the Garuda brand," UBS said in a note on Monday.

Citilink continued to disappoint in terms of its load factor of 70 percent from Jan-Sept 2012 due to rising competition in the low-end segment, the note said.

"We think Citilink's turnaround relies on cost savings with the expected completion of fleet renewal in 2014 being the main driver. If this fails, gains at Garuda could be offset by ongoing losses at Citilink."

Citilink, the low-cost unit of Garuda, has ordered 25 Airbus A320neo aircraft, the European planemaker said on Monday, in a deal worth around $2.4 billion at list prices last month. {ID:nWEA007JN]

The airline's shares were unchanged at 660 rupiah, while the broader index was up 0.22 percent.

1119 (0419 GMT) (Reporting by Andjarsari Paramaditha, Editing by Prateek Chatterjee)

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