Sakari: Merrill Lynch cuts TP to $2.40 from $2.70, although maintains Buy Call. House expect SAR to release 1Q12 results by end-April and cut earnings estimates by 17% for 2012 and 2013 on lower volume expectations in Jembayan from 10mt to 9mt, and 7-8% higher FOB costs on a higher expected stripping ratio and deeper mining pit in Jembayan and Sebuku.
Tip prices for the year should remain relatively stable as understand grp has managed to lock in 35% of 2012 volume at a fixed price while the remaining 65% is either unpriced or index-linked.
Overall, expect some share price weakness after 1Q results but note that we could see an enhanced buying opportunity for SAR after 1Q12 results. After all, the share price corrected around 20% after 4Q results and has now traded one SD below its historical mean P/E.
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