Straits Asia

Straits Asia: CS maintains neutral with $3.20 TP. Recall that SAR reported 2Q11 net profit of US$39 m, in line with estimates, albeit at the lower end.
In conference call, mgt gave assurance that cost pressure should ease somewhat with lower strip ratio at the SBK mine. 3Q ASP guidance is conservative but expect a strong recovery in 4Q, with rising spot prices and contribution from higher CV coal from the SBK mine.
House tip SAR’s earnings momentum to improve in 2H11 to meet mkt expectations. Earnings growth outlook in the medium term is strong but hinges on the successful development of the Northern Lease. Goldman meanwhile maintains Sell with $2.60TP.