Sakari

Sakari: DBSV maintains Buy with $2.40 TP, following 1Q12 results. House expect earnings will pick up sequentially. While benchmark Newcastle coal prices could hover around US$95-100/ ton in the near term, note that the April contracts between Jap buyers and Aus miners have been inked at levels of US$115/ ton, and hence remain confident of medium- to long-term outlook and believe coal prices should rebound in 2H12. Ongoing softness in the subbituminous mkt prompted mgt to bring forward dev of two new mine pits at Jembayan to 1Q12, and thus, SAR remains in a position to benefit from higher coal sales, amidst potentially better market conditions in 2H12. Given recent underperformance of the stock though, believe that the weak start to FY12 has already been largely priced in, and current below-mean valuations could be an attractive entry point to play the sequential recovery in earnings.