Straits Asia Resources

Straits Asia Resources: FY10 net profit of US$88m ahead of consensus’ US$80m expectation. 4Q net profit at US$36m, -4% yoy, but +56% qoq, driven by higher volumes, lower costs and higher ASP…

SAR produced and sold 2.8m and 2.9m of coal r’ptively in 4Q (+28% yoy, +4% qoq), ahead of forecasts, driven by stronger than expected pdtn at Sebuku. Mgt maintains guidance for the final borrow-use permits for its re-zoned Sebuku mine to be issued by mid-2011, which would enable ramp up of pdtn in 2H11.
Co. is looking to increase pdtn to 11-11.5 mt in 2011 (90%/10% from Jembayan/ Sebuku), vs 10.6m mt in 2010…

4Q ASP rose 5% qoq to US$75.5/t, beating analyst forecasts, driven by the higher proportion of Sebuku coal sales. FY10 ASP was US$72.8/t. Co has so far priced 40% of 2011 pdtn (of which 25-30% on 2010 benchmark pricing), and the remaining 60% is unpriced/ indexlinked (30% index linked, 20% unpriced, 10% spot).
Higher sales contributed to lower pdtn cash cost in 4Q of US$43.8/t, FY10 of US$46.9/t. But that could rise going forward due to higher oil prices…

Stock trades at 13.2x consensus FY11E P/E vs sector’s 9.3x.
Macquarie, UBS maintain Outperform. both with $3.40 TP.
DMG downgrades to Neutral with $2.49 TP, says valuations fair.
Goldman maintains Neutral with $2.30 TP.