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.

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Indo Tambangraya Megah / Equity Bottom-Up

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<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 FY24 revenues of $2.3 billion and profits of $374 million, reflecting declines of 3% and 25%, respectively, consistent with expectations amid lower coal prices.</li>
<li>The company will encounter higher costs in FY25 as the B40 biodiesel mandate takes effect. This is expected to put pressure on margins for all coal producers.</li>
<li>Alongside declining coal prices, we anticipate profits will fall to $250-300 million. This positions the stock at an FY25 PE of 5- 6.5x with a 12-13% dividend yield.</li>
</ul>



Indo Tambangraya Megah (ITMG IJ)  reported FY24 revenues of $2.3 billion and profits of $374 million, reflecting declines of 3% and 25%, respectively, consistent with expectations amid lower coal prices.
The company will encounter higher costs in FY25 as the B40 biodiesel mandate takes effect. This is expected to put pressure on margins for all coal producers.
Alongside declining coal prices, we anticipate profits will fall to $250-300 million. This positions the stock at an FY25 PE of 5- 6.5x with a 12-13% dividend yield.


ITMG IJ Q4 FY24: Coal Price Decline Squeezes Margins, FY25 Costs To Increase

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<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> recently had a decent move when it reported strong 3Q 2024 earnings in November. Despite that, it trades at a 12% dividend yield (65% payout).</li>
<li>In our last<a href="https://www.smartkarma.com/insights/itmg-ij-steady-coal-prices-mine-life-upgrade-43-of-the-mkt-cap-in-cash-and-11-dividend-yield" target="_blank" rel="noopener"> insight</a>, we flagged an increase in mine life to 19 years (vs 14 years), further clarifying high-margin cash flows for longer. </li>
<li>The company has 926 mn USD in net cash, ~50% of its market capitalization, and is trading at 5.5x PE (assuming 350 mn USD profits vs. 9MFY24 273 mn USD).</li>
</ul>



Indo Tambangraya Megah (ITMG IJ) recently had a decent move when it reported strong 3Q 2024 earnings in November. Despite that, it trades at a 12% dividend yield (65% payout).
In our last insight, we flagged an increase in mine life to 19 years (vs 14 years), further clarifying high-margin cash flows for longer. 
The company has 926 mn USD in net cash, ~50% of its market capitalization, and is trading at 5.5x PE (assuming 350 mn USD profits vs. 9MFY24 273 mn USD).


Indo Tambangraya Megah (ITMG IJ): 50% of Mkt Cap in Cash, 12% Yield

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<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 an inline Q1 FY24, with stabilizing price. Net cash at 875 mn USD is 50% of mkt cap. </li>
<li>If coal prices remain stable at 135 USD/ton, the company will be able to churn out 400 mn USD of profits (~24 mnt sales).  </li>
<li>With a minimum 65% dividend payout ratio, we derive a dividend yield of 15%. This number could be an upside risk as payout ratios have also been 100%.</li>
</ul>



Indo Tambangraya Megah (ITMG IJ) reported an inline Q1 FY24, with stabilizing price. Net cash at 875 mn USD is 50% of mkt cap. 
If coal prices remain stable at 135 USD/ton, the company will be able to churn out 400 mn USD of profits (~24 mnt sales).  
With a minimum 65% dividend payout ratio, we derive a dividend yield of 15%. This number could be an upside risk as payout ratios have also been 100%.


Indo Tambangraya Megah (ITMG IJ): Pure Coal Play at 4.5x PE, 50% of the Market Cap in Cash

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<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 its Q4 2023/FY23 numbers with revenues down 46%/35% YoY and profits down 58%/69% YoY on declining coal prices (113 USD/ton Vs 192 USD/ton) .</li>
<li>We expect spot coal prices to remain range-bound between 130-150 USD/ton, resulting in company profits ranging between 350-500 mn USD (4x-6x PE range) with dividend yield ranging from 11%-15%.</li>
<li>The company also has a cash buffer of 850 million USD, roughly 45% of the current market capitalization. </li>
</ul>



Indo Tambangraya Megah (ITMG IJ) reported its Q4 2023/FY23 numbers with revenues down 46%/35% YoY and profits down 58%/69% YoY on declining coal prices (113 USD/ton Vs 192 USD/ton) .
We expect spot coal prices to remain range-bound between 130-150 USD/ton, resulting in company profits ranging between 350-500 mn USD (4x-6x PE range) with dividend yield ranging from 11%-15%.
The company also has a cash buffer of 850 million USD, roughly 45% of the current market capitalization. 


ITMG IJ: Q4 2023 Inline, Deep Value, 45% of the Mkt Cash and ~11% Dividend Yield on Spot

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<li>We listened to the <a href="https://whitehavencoal.com.au/wp-content/uploads/2023/10/Whitehaven-Investor_update.mp4" target="_blank" rel="noopener">conference call </a>held by <a href="https://www.smartkarma.com/entities/whitehaven-coal-ltd" target="_blank" data-smartkarma-citation="entities:14253:1" rel="noopener">Whitehaven Coal (WHC AU)</a> to update investors on its acquisition of BHP's coking coal mines and  Q2 2024 production. </li>
<li>Based on spot prices of coking coal over 350 USD/ton and cash costs of 20% lower than the average of 2 years, the EV-EBITDA of acquisition is 1.8x</li>
<li>The acquisition could be massively accretive if coking coal prices remain stronger for longer as the company pivots its strategy to becoming a large met coal producer. </li>
</ul>


We listened to the conference call held by Whitehaven Coal (WHC AU) to update investors on its acquisition of BHP's coking coal mines and  Q2 2024 production. 
Based on spot prices of coking coal over 350 USD/ton and cash costs of 20% lower than the average of 2 years, the EV-EBITDA of acquisition is 1.8x
The acquisition could be massively accretive if coking coal prices remain stronger for longer as the company pivots its strategy to becoming a large met coal producer. 


Whitehaven Coal: Great Acquisition, Cash Gone, Now At The Mercy of The Cycle

Indonesia

PT Indo Tambangraya Megah Tbk operates as a coal exploration and mining company that provides energy and electricity support. The Company operates in Indonesia and supplies coal to the world energy market.

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Indo Tambangraya Megah (ITMG IJ)

ITMG IJ Q4 FY24: Coal Price Decline Squeezes Margins, FY25 Costs To Increase

We summarize the FY24 results for ITMG IJ. With 58% of the market capitalization in cash and 15% trailing dividend yield, there is enormous value,...

Sameer Taneja