Sakari Resources

Sakari Resources: Announced good set of results which was in-line. Rev at $222.7m, +21% yoy and -1.4% qoq, while Net Profit at $33.8m, +46% yoy and -8.4% qoq. While EBITDA Margins improved at 28.5% vs 24.9% yoy.

Strong performance was attributed to a hike in ASP, and a good performance by grp’s 2 mines, which saw Sebuku begin mining coal from its Northern Leases, while weather conditions were good, and rainfall had no unexpected impact on operations. Overall, coal production at 2,779 mt was +2% yoy and +5.5% qoq, while ASP at $94.36/ton, +32% yoy and flat qoq, as grp increases the percentage of Coal on an index-linked basis, providing higher exposure to mkt prices.

Looking ahead, grp remains confident of prospects, and Notwithstanding the backdrop of short-term volatility, the underlying fundamentals of the thermal coal market in Asia remain unchanged with all evidence pointing to a lengthy period of very strong and rising energy demand, and tip further ramping up of its Northern leases to add positively to production going forward.

We note that grp balance sheet remains strong, with a Net Gearing of 38.2%, while at current price, valuations are compelling, with grp trading at an annualized 13.8x FY11E P/E vs 23x historical P/E. Ratings as follow:

DBSV maintains Hold but increases TP to $2.30 from $1.89.
Goldman maintains Sell with $1.70 TP.