Straits Resources: Goldman Sachs add grp to Conviction Sell list with $2.00 TP. Believe that mkt expectations are too high and house 2011E-12E net profit estimates are 32%-37% below Bloomberg consensus, driven by lower ASPs (which are in line with Co. guidance) and higher costs (as Co. recently raised the strip ratio for the Jembayan mine), which are the highest vs ASEAN peers….
Conclude that SAR screens as the most expensive thermal coal stock globally at 19.8x FY11E P/E and 11.7x FY11E EV/EBITDA, at a 27/30% premium to ASEAN peers respectively. This compares with mid-cycle P/E and EV/EBITDA of 12X and 8X respectively, with Co’s growth also subject to issuance of mine permit by 1H11.
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