Coal / Sakari

Coal / Sakari: Macquarie tips a rebound in Asean Coal Play. Note that current Asean coal sector share prices are pricing in a US$80/ton Newcastle benchmark price, about 13% below the current spot price and 24% below the Chinese marginal cost curve. Add that Asean coal sector has sold off recently as declines were compounded by macro concerns in Europe and China, even as thermal coal supply continues to surprise on the upside. In the short term, house predicting a floor on coal prices is challenging, but expect supply to adjust (as already seen in the U.S., China), providing improved price stability over a six-to-12 month view helped by seasonal changes and Chinese loosening. Over the next six months or so, expect a rebound in coal prices and coal equities from their recent lows. House keeps Sakari and Bukit Asam (PTBA.JK) as its preferred plays, with $3.00 and IDR20,500 TP respectively, rating both Outperform.