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The biggest Asian stock gainer was Indonesia Mining, up 1,650%

The biggest Asian stock gainer was Indonesia Mining, up 1,650%

Asia’s hottest stock has been underperforming in recent months, but analysts think PT Adaro Minerals Indonesia could still climb as one of its recent acquisitions is set to boost sales in the electric vehicle supply chain.

The Indonesian coal company’s shares have risen 1,650 percent so far this year, more than six times the gain of the second-ranked stock in the MSCI Asia Pacific Index. It is also the best performer among the more than 3,600 metals and mining companies tracked by Bloomberg.

The stock has fallen 40 percent from its April high as the market worries that a sharp rate hike by the U.S. Federal Reserve and a possible recession could hurt the metals industry. However, the company’s use of aluminum production as a way to increase sales of electric vehicles could mean more growth ahead. Analysts expect another 53 percent growth over the next 12 months, according to Bloomberg forecasts.

Adaro Minerals shares rose 4 percent to IDR1,820 at one point in early trading Thursday, reversing a 4.1 percent drop the previous day.

Christopher Andre Benas, head of research at BCA Sekuritas, said the market is “appreciating the electric vehicle story. He added that the company’s existing coking coal business will also increase due to increased demand from the nickel smelting industry. The nickel smelting industry relies heavily on this fuel.

The company reported a 491 percent increase in first-half net profit in August, as sales volumes rose 9 percent to 1.17 million tons on higher average selling prices.

In February, Adaro acquired its PT Adaro Indo aluminum company, which is building an aluminum refinery in North Kalimantan province. The company aims to start production in the first quarter of 2025 to supply material for the electric vehicle industry. By then, these revenues will contribute more than half of the company’s revenue, which currently comes exclusively from coal. Aluminum is the main raw material for many electric car bodies, as electric cars are lighter than those made of steel.

Ciptadana Sekuritas analyst Thomas Radityo said, “The stock is still very cheap given the potential value of the aluminum business in the coming years.” The brokerage set a 12-month target price of IDR 2,650 on Adaro Minerals, up more than 50% from the last close.

Adaro’s P/E ratio of nearly 12 times hovers near the lows reached over the summer, although it is about 6 times higher than domestic peers (including PT Bukit Asam and PT Indo Tambangraya Megah, which produce power coal), according to Bloomberg data. The ratios of China’s Shanxi Coking Coal Energy Group and Australia’s Whitehaven Coal Ltd. both of which produce coking coal, are both around 2.

However, there have been some setbacks. Prices for all commodities, from iron ore to copper, have fallen sharply in recent months on concerns about China’s economic growth, which has weakened demand. A stronger dollar has also put pressure on the broader market.

” The challenges for Adaro Minerals are lower commodity prices for coking coal and aluminum, and lower demand due to the expected slowdown in global GDP,” said Hasbie, an analyst at Trimegah Sekuritas Indonesia. The brokerage has a buy rating on the stock, citing an increasingly attractive valuation once the aluminum business kicks into gear.


Post time: Sep-30-2022