regional industry focus nickel
TRANSCRIPT
ed: TH/ sa: xx, PY, CS
Emerging as a mainstay of EV
battery sector
• Nickel price surge powered by EV proves our positive
view on nickel prices and raise our price forecasts
• Key battery makers have opted to invest in Indonesia
for its nickel resources
• Nickel and share prices precede fundamental
improvement in the last short period
• Downgrade calls on ANTM and INCO to FULLY VALUED
and HOLD respectively
Stronger-than-expected nickel prices supported by brighter
outlook for EV and concerns on supply growth. LME nickel
prices jumped to US$18,015/ton on 18 Jan 2021, up 63%
from the trough of US$11,055/ton on 23 Mar 2020 and up
8.8% YTD, mainly attributed to (i) positive outlook on
demand from electric vehicle (EV) batteries, (ii) strong nickel
demand in China backed by the stainless steel sector, and
(iii) tight ore supply from disruptions.
Indonesia is emerging as a key EV battery player due to its strong presence in nickel sector. The Indonesian government decided to establish PT Indonesia Battery Holdings through the participation of key SOEs such as MIND ID and ANTM in Oct 2020. Last Dec, it signed MOUs with the two largest EV battery makers, CATL in China and LG Group in Korea, which plan to build battery plants in Indonesia. This was enabled by its ample resources of nickel which is a key raw material for EV batteries.
Raise our nickel price forecasts and maintain our positive outlook on the sector. Factoring in stronger nickel prices, we revised up our nickel price forecasts for 2021 and 2022 by 6% and 4% to US$15,000/ton and US$15,500/ton respectively. We forecast nickel consumption in rechargeable batteries to register a 23.7% CAGR by 2030 which will drive up its contribution to 30% from the current 5%. Specifically, we expect the Class I nickel market to remain in deficit by 2025. Despite our positive view on the sector, the recent nickel price rally appears to be excessive.
Raise the TPs for our coverage but downgrade our calls on
strong share price performance. Based on our higher nickel
price forecasts, we revised up our FY21 and FY22 earnings
forecasts under our coverage. After factoring in their higher
growth potential, we increase our TPs on ANTM and INCO to
Rp2,700 and Rp6,600 respectively. However, we downgrade
our calls on ANTM to FULLY VALUED and INCO to HOLD for
potential downside and limited upside respectively.
JCI : 6,389.83
Analyst
LEE Eun Young +65 6682 3708
LME Nickel prices & ANTM share prices
LME Nickel prices & INCO share prices
Source: DBS Bank
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ANTM share price (R)
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DBS Group Research. Equity
19 Jan 2021
Regional Industry Focus
Nickel
Refer to important disclosures at the end of this report
STOCKS
12-mth
Price Mkt Cap Target Price Performance (%)
Rp US$m Rp 3 mth 12 mth Rating
Vale Indonesia 6,625 4,695 6,600 67.3 94.3 HOLD
Aneka Tambang 3,120 5,348 2,700 231.9 273.7 FULLY
VALUED
Source: DBS Bank, Bloomberg Finance L.P.
Closing price as of 15 Jan 2021
Industry Focus
Nickel
Page 2
Indonesia to grow as a hub for nickel and EV batteries
Establishment of PT Indonesia Battery Holding. In Oct 2020,
the Indonesian government announced that PT Indonesia
Battery Holdings will be formed by state miners MIND ID
and Aneka Tambang (ANTAM), state utility Perusahan Listrik
Negara (PLN) and state oil company PT Pertamina.
Indonesia is also in talks with China’s CATL and South
Korea’s LG Chem, the world’s top two EV battery makers by
output, to invest between US$12bn and US$20bn to
develop its dream supply chain. PT Indonesia Battery
Holdings aims to produce between eight and 10 gigawatt
hours (GWh) worth of batteries each year, kicking off
operations around 2-3 years from now.
Mining Industry Indonesia (MIND ID) is Indonesia's mining
industry holding company comprising PT ANTAM Tbk, PT
Bukit Asam, PT Freeport Indonesia, PT Indonesia Asahan
Aluminium (Persero), and PT Timah Tbk.
MOU with CATL. On 16 Dec 2020, Contemporary Amperex
Technology (CATL) announced plans to build a US$5bn
lithium battery factory in Indonesia, ramping up its capacity
amid growing demand for electric vehicles. The
government official said that a deal between China-based
CATL and Indonesian state miner PT Aneka Tambang has
been inked to ensure that 60% of its mined nickel goes into
batteries in Indonesia
EV battery MOU agreed with LG Energy Solution. On 30
Dec 2020, Indonesia and LG Energy Solution signed an
MOU for an EV battery investment deal worth US$9.8bn. At
least 70% of the nickel ore needed to produce the EV
batteries should be processed in Indonesia, according to
the MOU (as reported by Reuters).
Indonesia is growing as a hub for EV batteries. These deals
will make Indonesia the first country to vertically integrate
the EV battery supply chain from the mining of nickel to the
manufacturing of batteries. The government’s policy to
grow its nickel downstream industry by banning nickel ore
exports has helped Indonesia to become a key NPI supplier
by attracting investments from Chinese players. And now,
the government’s initiation of its nickel-based battery
project with global battery players will seal Indonesia’s
position as an integrated battery manufacturing country
going forward. According to the government, the strategic
partner selection and feasibility study (FS) will be furnished
within this year. The details on commercial and technical
aspects will be determined after the FS and partner
selection phase are accomplished.
Much stronger nickel price rally driven by optimism on EV
and strong performance of China’s stainless steel sector
Faster-than-expected nickel price rally. LME nickel prices
jumped to US$18,015/ton on 18 Jan 2021, up 63% from the
trough of US$11,055/ton on 23 Mar 2020 and up 8.8%
YTD, mainly attributed to (i) positive outlook on demand
from electric vehicle (EV) batteries, (ii) strong stainless steel
production growth in China, and (iii) tight ore supply from
mine disruptions.
Promising demand outlook supported by strong EV growth.
We expect global EV sales to increase 44% y-o-y to 2.47m
units in 2021 after an 18% decline in 2020, supported by
governments’ various policies and enhanced economics of
EV compared to ICE (Internal Combustion Engine) vehicles.
Falling battery price is a key factor for the economics of EV
and technology development for high nickel battery
bolsters that lower battery manufacturing costs. China and
Europe will likely lead the widespread adoption of EV with
aggressive policies including subsidies and environmental
regulations.
Outstanding EV performance in China. China’s new energy
vehicle (NEV) production and sales increased by 7.5% and
10.9% y-o-y in 2020, to 1,366k and 1,367k units
respectively. This was largely due to a recovery in 2H20
driven by the government’s extension of subsidies to 2022
from 2020, outweighing the serious decline in 1Q20.
Meanwhile, China’s total vehicle production and sales in
2020 fell by 2% and 1.9% y-o-y to 25.23m and 25.31m units
respectively. In 2021, China will reduce its subsidies for
NEVs by 20% y-o-y, but this is expected to have minimal
impact on the NEV market. China’s EV sales are forecast to
jump 40% y-o-y to 1.8m units in 2021, according to China
Association of Automobile Manufacturers (CAAM).
Industry Focus
Nickel
Page 3
China and Indonesia’s stainless steel production growth,
another positive. After registering an 18% production
decline in Jan 20, China’s stainless steel production has
been recovering swiftly. In 2020, China’s stainless steel
production and 300 series output are estimated to grow
5.2% and 8.7% y-o-y, respectively. Meanwhile, Indonesia
stainless steel output is projected to jump c 22 % in 2020.
As stainless steel account for 70% of nickel consumption,
the positive performance of China’s stainless steel sector
brightened the outlook on nickel demand. Note that
China’s stainless steel output account for 56% of the global
supply.
China’s BEV sales China’s PHEV sales
Source: CEIC, DBS Bank Source: CEIC, DBS Bank
Stainless steel output in China (by series) Stainless steel output in Indonesia
Source: SMM, DBS Bank Source: Bloomberg Finance L.P., DBS Bank
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Industry Focus
Nickel
Page 4
China’s net import of nickel grew at strong demand. China’s
net import of refined nickel is estimated to increase
substantially by 38% in 2020 at strong demand growth of c
15%, according to SMM. While, the production of refined
nickel in China would decline c 8% due to 12% decline in
NPI production.
China’s nickel supply-demand and net import
Source: SMM, DBS Bank
Concerns on supply fuelled nickel price rallies further
Tightening environmental control in Philippines. The
Philippine government recently ordered a halt on mining
on Tumbagan Island in Tawi-Tawi province due to
environmental impact concerns. While it did not cover the
Philippines’ nickel mining hub in Caraga and the current
impact is minimal, supply can be disrupted if the order
extends beyond the initial area. The Philippines is now the
largest nickel ore exporting country to China following
Indonesia’s ban of ore exports.
Downside risks to mines in New Caledonia. Meanwhile, Vale
has announced plans to place 30k tons p.a. capa Vale New
Caledonia mine on care and maintenance from 2021. Also,
Eramet warned that its nickel subsidiary in New Caledonia
faces the risk of liquidation within weeks if protests persist,
indicating a potential supply disruption.
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1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20 3Q20E
(k ton)(k ton) Net imports of primary nickel
Total domestic primary nickel output
Total domestic primary nickel consumption
Industry Focus
Nickel
Page 5
Global nickel market registered supply surplus for 10M20
Mined nickel output declined but refined nickel output was
flattish in 2020. In 10M20, global mined nickel production
fell 11.2% y-o-y to 1.89m tons, mainly due to declines in (i)
Philippines due to environmental controls and COVID-19-
related lockdowns in 1H20, and (ii) Indonesia due to
implementation of ore export ban. As a result, China, one
of the main importers of nickel ore from Indonesia and the
Philippines, saw a 14.1% y-o-y drop in 10M20 refined nickel
output. However, this was offset by a whopping 41.5% y-o-y
jump in Indonesia’s refined output in 10M20, thanks to
smelting capacity ramp-up. This led to only a marginal
decrease of 0.9% y-o-y in global refined nickel production.
Sluggish demand due to slump in developed economies.
On the demand side, nickel consumption fell 6.3% y-o-y in
10M20, owing to lower demand from disrupted stainless
steel supply chains. Refined consumption in China, the
largest consumer of refined nickel, declined slightly by 1.5%
y-o-y due to COVID-19-related slowdown in downstream
industries in 1Q20. Also, refined consumption in
EU/Japan/US registered declines of 19%/5%/9%, as affected
by the pandemic.
Supply surplus and nickel prices ahead of fundamentals.
Accordingly, the nickel market was in a surplus of 64k tons
in 10M20, a turnaround from the market deficit of 45k tons
in 10M19. We expect 2020 to have registered a market
surplus for the full year. However, nickel prices rallied to
US$18,015/ton on 18 Jan, the highest since Oct 2019 on
positive market sentiment, ahead of fundamentals.
Nickel demand, supply, imports and price YTD
(k tons) 2017 2018 2019 y o y % 10M19 10M20 y o y %
Nickel mine production 2,162 2,393 2,596 8.5% 2,125 1,886 -11.2%
Indonesia 357 651 918 40.9% 718 536 -25.4%
Philippines 379 390 341 -12.5% 300 254 -15.4%
New Caledonia 215 216 210 -3.1% 172 168 -2.4%
Australia 185 160 159 -0.8% 134 147 9.7%
Refined nickel production 2,056 2,244 2,404 7.1% 1,976 1,959 -0.9%
China 621 733 852 16.3% 696 598 -14.1%
of which: NPI 424 457 584 27.8% 431 389 -9.7%
Indonesia 187 280 361 28.9% 292 413 41.5%
of which: NPI 165 255 335 31.4% 271 392 44.7%
Japan 187 187 183 -2.2% 151 142 -6.0%
Refined nickel consumption 2,095 2,342 2,432 3.8% 2,021 1,895 -6.3%
China 982 1,096 1,304 19.0% 1,074 1,058 -1.5%
EU 322 330 304 -7.8% 261 212 -18.8%
Indonesia 61 176 182 3.0% 151 152 0.7%
Japan 163 175 155 -11.7% 127 121 -4.5%
USA 144 136 106 -22.5% 90 82 -9.3%
Market balance -40 -98 -28 -45 64
China's import
Nickel ore (gross weight) 35,046 46,964 56,158 19.6% 45,841 32,354 -29.4%
Refined nickel (net import) 217 198 156 -21.3% 144 90 -37.8%
LME nickel price (US$/ton) 10,411 13,122 13,936 6.2% 13,788 13,268 -3.8%
Source: WBMS, Bloomberg Finance L.P., DBS Bank
Industry Focus
Nickel
Page 6
LME nickel prices vs. warehouse stock China’s nickel ore imports (by country of origin)
Source: Bloomberg Finance L.P., DBS Bank Source: Bloomberg Finance L.P., DBS Bank
Market deficit in Class I nickel to buoy prices, raise nickel
price forecasts.
EV battery segment to drive strong demand growth for
nickel. We forecast nickel demand to grow strongly by 6.9%
in 2021 and register a 4.1% CAGR by 2025. The emerging
EV battery sector will drive strong nickel demand growth
and increase its contribution to the sector drastically. We
foresee nickel consumption in rechargeable battery to post
a 23% CAGR by 2025 which will lead its contribution to
increase by 14% in 2025 and 30% in 2030 from the current
5%. This is backed by our forecast for nickel demand from
batteries to grow 24% annually to 1.27m tonnes by 2030.
Nickel demand from EV batteries is expected to register a
higher annual growth of 32% by 2030.
Class I nickel market to tighten; we raise our nickel price
forecasts. We expect the nickel market to experience a
tighter demand-supply situation and remain in deficit from
2021onwards. Specifically, we expect the Class I nickel
market to face a larger supply shortage due to strong
demand growth. This will drive nickel prices higher as
demand and supply of Class I nickel are expected to grow
by 5.9% and 3.3% annually by 2025, respectively.
Meanwhile, the market for Class II nickel is expected to
register a surplus from 2022 onwards due to strong
capacity expansion of NPI in Indonesia. NPI production in
Indonesia is expected to grow at 15.6% CAGR by 2025 and
exceed China’s production level by 2021. Factoring in
stronger nickel prices, we revised up our nickel prices
forecasts for 2021 and 2022 by 6% and 4% to
US$15,000/ton and US$15,500/ton respectively.
Nickel demand forecasts by usage
(k tons) 2019 2020F 2021F 2022F 2023F 2024F 2025F CAGR 19~25
Stainless 1,706 1,643 1,754 1,829 1,903 1,960 2,004 2.7%
Alloy Steel 195 196 198 200 202 204 207 1.0%
NF Alloy 97 98 99 100 101 102 103 1.0%
Plating 195 198 202 206 211 215 219 2.0%
Foundry 122 124 126 129 132 134 137 2.0%
Battery 122 109 152 216 277 347 421 23.0%
Total 2,435 2,369 2,533 2,681 2,825 2,962 3,091 4.1%
y-o-y % 4.0% -2.7% 6.9% 5.9% 5.4% 4.8% 4.4% Source: WBMS, INSG, Bloomberg Finance L.P., DBS Bank
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LME Nickel Price
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(m tons)Indonesia New Caledonia Philippines Others
Industry Focus
Nickel
Page 7
Nickel demand, supply and price forecasts
(k tons) 2018 2019 2020F 2021F 2022F 2023F 2024F 2025F
Nickel mine production 2,393 2,596 2,361 2,705 2,855 3,071 3,120 3,105
y-o-y % 10.7% 8.5% -9.0% 14.6% 5.5% 7.6% 1.6% -0.5%
Refined nickel production 2,244 2,404 2,366 2,512 2,672 2,773 2,903 2,998
y-o-y % 9.2% 7.1% -1.6% 6.2% 6.4% 3.8% 4.7% 3.3%
Refined nickel consumption 2,342 2,435 2,369 2,533 2,681 2,825 2,962 3,091
y-o-y % 11.5% 4.0% -2.7% 6.9% 5.9% 5.4% 4.8% 4.4%
Balance -98 -31 -2 -21 -9 -52 -59 -93
Class I 142 74 -5 -4 -20 -56 -79 -107
Class II -240 -101 2 -17 10 4 20 13
Stock 222 191 235 210 190 180 170 170
Market balance -287 -62 42 -46 -29 -62 -69 -93
LME nickel price (US$/ton) 13,122 13,936 13,789 15,000 15,500 16,300 17,000 17,500
y-o-y % / q-o-q % 26.0% 6.2% -1.1% 8.8% 3.3% 5.2% 4.3% 2.9%
Source: WBMS, INSG, Bloomberg Finance L.P., DBS Bank
Supply: Nickel supply growth supported by Indonesia’s NPI
capacity expansion
Mined supply from the Philippines and Indonesia to
recover. We expect global mined supply to jump 14.6% y-o-
y in 2021, mainly supported by output recovery in the
Philippines and Indonesia, rebounding from a 9% decline in
2020. Mined output from the Philippines is forecast to
rebound by 19% y-o-y in 2021 (vs. -10% in 2020) due to
production ramp-up and mines reopening amid China’s
rising reliability on the import of Philippines’ ore. Also,
mined nickel production in Indonesia is expected to grow
23% y-o-y in 2021 (vs. -25% in 2020) with increased
domestic demand for ore from local processing facilities.
.
Mined nickel: Supply forecast
(k tons) 2018 2019 2020F 2021F 2022F 2023F 2024F 2025F 2019 2020F 2021F
19-25F
CAGR
Europe 289.8 285.0 285.0 292.8 291.8 292.8 295.7 295.7 -1.6% 0.0% 2.7% 0.6%
America 419.1 409.6 399.0 449.8 448.8 455.2 461.6 468.1 -2.3% -2.6% 12.7% 2.3%
Asia 1,171.4 1,388.7 1,129.6 1,342.6 1,463.0 1,666.8 1,700.8 1,686.7 18.6% -18.7% 18.9% 3.3%
Indonesia 651.1 917.5 693.0 852.0 962.0 1,155.0 1,203.0 1,223.3 40.9% -24.5% 22.9% 4.9%
Philippines 390.0 341.3 307.2 365.0 366.9 368.9 346.8 311.0 -12.5% -10.0% 18.8% -1.5%
Other Asia 130.3 129.9 129.4 125.6 134.1 142.9 151.0 152.5 -0.4% -0.3% -2.9% 2.7%
Oceania 411.6 401.0 435.6 507.0 537.0 541.6 547.4 540.5 -2.6% 8.6% 16.4% 5.1%
Others 101.2 111.3 112.2 113.2 114.2 114.2 114.2 114.2 9.9% 0.9% 0.9% 0.4%
Global 2,393 2,596 2,361 2,705 2,855 3,071 3,120 3,105 8.5% -9.0% 14.6% 3.0%
Source: WBMS, DBS Bank
Industry Focus
Nickel
Page 8
Refined nickel supply growth driven by Indonesia. We expect
refined nickel output to grow 6.2% y-o-y in 2021 from a
1.6% decline in 2020, driven strongly by Indonesia.
Indonesia’s refined output is expected to increase by 13% y-
o-y in 2021 (vs. +51% in 2020) due to the increase in local
refining capacity. Meanwhile, China’s refined nickel
production is forecast to decline by 4% y-o-y in 2021 due to
minimal profitability and tight ore supply. Instead, Chinese
nickel companies are likely to increase refined nickel
production including NPI in Indonesia to meet its demand
for nickel. Note that Chinese NPI production fell 10% y-o-y in
10M20 while Indonesian NPI production jumped 56% y-o-y,
according to SMM’s data.
High nickel prices crucial for the success of HPAL projects in
Indonesia. Amid extremely positive view on nickel’s outlook
in the EV battery industry, Indonesia’s high-pressure acid
leaching (HPAL) projects which produce intermediates for
batteries in the pipeline are important to the nickel supply-
demand horizon. The successful ramp-up to full capacity
without capex overruns at the Harita-Lygend HPAL project is
crucial for the future landscape of Indonesia’s nickel sector.
This is especially so, as it is Indonesia’s first HPAL project,
and is slated to be commissioned this year. In addition, we
believe nickel prices need to reach and sustain levels that
would significantly incentivise Class I nickel producers using
HPAL technology as the technology is rather complex and
difficult to ramp up to full capacity. In 2021, we expect Class
I nickel supply to grow faster by 7% y-o-y as compared to
Class II supply’s growth of 5% y-o-y, in line with strong
demand for Class I nickel in the booming EV industry.
Refined nickel: Supply forecast
(k tons) 2018 2019 2020F 2021F 2022F 2023F 2024F 2025F 2019 2020F 2021F 19-25F
Europe 391.7 399.4 366.6 399.3 412.3 412.3 412.3 412.3 2.0% -8.2% 8.9% 0.5%
America 294.3 283.4 261.4 289.8 304.3 319.5 335.4 352.2 -3.7% -7.7% 10.8% 3.7%
Asia 1,263.0 1,454.0 1,473.0 1,528.8 1,638.4 1,697.6 1,793.4 1,844.1 15.1% 1.3% 3.8% 4.0%
Indonesia 279.8 360.8 545.0 616.6 740.7 819.1 925.4 989.3 28.9% 51.0% 13.1% 18.3%
China 732.9 852.4 699.2 672.8 655.9 636.2 625.9 612.6 16.3% -18.0% -3.8% -5.4%
Other Asia 250.2 240.8 228.8 239.4 241.8 242.2 242.1 242.2 -3.8% -5.0% 4.6% 0.1%
Oceania 222.4 194.4 199.5 220.1 243.0 259.2 266.8 284.0 -12.6% 2.6% 10.4% 6.5%
Others 72.7 72.9 65.6 74.1 74.1 84.6 95.0 105.4 0.3% -10.0% 13.0% 6.4%
Global 2,244 2,404 2,366 2,512 2,672 2,773 2,903 2,998 7.1% -1.6% 6.2% 3.7%
Source: WBMS, DBS Bank
Industry Focus
Nickel
Page 9
Raise the TPs for our coverage but downgrade calls due to
strong share price performance. Based on our higher nickel
price forecasts, we revised up our FY21 and FY22 earnings
forecasts under our coverage. With this, factoring in a higher
growth potential, we increased our terminal growth rates for
ANTM and INCO to 5% and 3% respectively as ANTM is
expected to have more opportunities to engage in the
battery sector as it is an SOE. Accordingly, we increased our
TPs for ANTM and INCO to Rp2,700 and Rp6,600
respectively. However, we downgrade our calls on ANTM to
FULLY VALUED and INCO to HOLD due to potential
downside and limited upside respectively.
ANTM: Raise TP to Rp2,700 but downgrade to FULLY
VALUED. We bump up our FY20F/21F EPS by 33%/94% to
factor in higher nickel price forecasts by 4%/6% and higher
nickel ore sales volume assumptions. Taking into account its
potential growth in the EV battery industry, we raise our
terminal growth rate to 5% from 1% previously to derive to
our new TP. The stock has outperformed the market and
sector by rising 814% and 201% from the trough in Mar and
since Nov 2020 respectively. We hold a positive view on its
growth as the key nickel supplier for the rechargeable
battery sector over the long term, backed by its ample nickel
reserves that account for 25% of the total reserves in
Indonesia. However, we downgrade our call to FULLY
VALUED because of the downside potential even after
raising our TP to Rp2,700.
INCO: Raise TP to Rp6,600 but downgrade to HOLD. We
revised up our FY20F/21F EPS by 22%/39% to bake in the
tax benefit for FY20 and 4%/6% higher nickel price
forecasts. The stock has outperformed the market and
sector by rising 362% and 64% from the trough in Mar and
since Nov 2020 respectively. Due to the limited upside even
after raising our TP to Rp6,600, we downgrade our call to
HOLD. However, our long-term outlook on the counter is
still positive given thet (i) nickel matte capacity increase to
90k tons p.a. from 75k tons p.a. by 2021, (ii) JV for HPAL
plant with 40k tons p.a. capacity of battery-grade nickel by
2025, and (iii) JV for NPI plant with 73k tons p.a. capacity of
NPI by 2024 – INCO will produce c.130k tons of Class I nickel
and 73k tons of Class II nickel.
Industry Focus
Nickel
Page 10
Earnings forecasts for our coverage
Aneka Tambang (Rpbn) FY2018 FY2019 FY2020F FY2021F FY2022F
Total Revenue 25,275 32,719 27,042 30,032 29,325
Operating Profit 1,556 956 2,511 3,836 4,231
EBITDA 3,735 1,919 3,245 4,790 5,276
EBIT 2,883 800 2,225 3,690 4,071
Profit Before Tax (After-EI) 2,013 687 1,790 3,236 3,630
Net Profit (After-EI) 1,636 194 1,163 2,103 2,360
Return on Average Equity (ROAE) 2.2% -10.7% 6.2% 10.4% 10.5%
EPS (After-EI) 17.76 -82.08 48.41 87.53 98.20
EPS (After EI) Growth (y-o-y) -73.7% nm nm 80.8% 12.2%
P/E (X) 131.8 -28.5 64.5 35.6 31.8
Price/ BVPS (X) 2.8 3.3 3.9 3.5 3.2
EV/ EBITDA (X) 15.8 39.9 24.9 16.9 15.4
Vale Indonesia (US$m) FY2018 FY2019 FY2020F FY2021F FY2022F
Total Revenue 777 782 790 791 964
Operating Profit 85 88 113 108 168
EBITDA 214 220 250 249 314
EBIT 85 88 113 108 168
Profit Before Tax (After-EI) 83 89 120 111 173
Net Profit (After-EI) 61 57 94 87 121
Return on Average Equity (ROAE) 3.3% 3.0% 4.7% 4.2% 5.6%
EPS (After-EI) 0.01 0.01 9.44 8.75 12.20
EPS (After EI) Growth (y-o-y) -496.3% -5.1% 63.5% -7.3% 39.4%
P/E (X) 77.6 81.8 50.0 54.0 38.7
Price/ BVPS (X) 2.5 2.4 2.3 2.2 2.1
EV/ EBITDA (X) 20.7 20.2 17.2 16.9 13.8
Source: Bloomberg Finance L.P., DBS Bank
Peer comparison table Mkt cap P/E P/BV EV/EBITDA ROE
Company Share price US$m 2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F
Aneka Tambang Rp 2,910 5,326 69.5 48.2 42.5 3.8 3.6 3.4 24.0 20.4 18.3 5.8 7.6 8.5
Vale Indonesia Rp 6,200 4,676 39.9 31.3 25.8 2.1 2.0 1.9 15.5 12.8 12.0 5.2 6.2 7.2
Nickel Asia Corp PHP 5.6 1,646 24.4 24.4 nm 1.2 1.2 nm 8.5 10.0 nm 10.3 nm nm
Norilsk Nickel RUB 25,588 55,305 12.5 8.0 9.0 10.4 8.7 8.1 8.2 6.1 6.5 93.3 125.2 100.0
Independence
Group AU$ 7.1 4,125 32.3 26.7 24.4 2.0 2.0 1.9 11.1 9.9 9.6 8.0 7.2 7.5
Eramet EUR 42.3 1,385 nm nm 20.2 1.1 1.0 0.9 8.4 5.0 3.4 (29.0) 5.3 9.4
Average 35.7 27.7 24.4 3.5 3.1 3.3 12.6 10.7 10.0 15.6 30.3 26.5
Median 32.3 26.7 24.4 2.1 2.0 1.9 9.8 9.9 9.6 6.9 7.2 8.5
Source: Bloomberg Finance L.P., DBS Bank
Forecasts based on market consensus
ed: CK/ sa: MA, PY, CS
HOLD (Downgrade from BUY)
Last Traded Price (15 Jan 2021): Rp6,625 (JCI : 6,373.40) Price Target 12-mth: Rp6,600 (0% downside) (Prev Rp4,700)
Analyst
LEE Eun Young +65 6682 3708 [email protected]
What’s New • Raise TP to Rp6,600, but downgrade call to HOLD
• 2021 earnings to decline due to tax effect and lower
sales volume
• To register strong results in 4Q20 and 1Q21, not
affected by reconstruction works
• Promising long-term growth outlook backed by
capacity expansion and new projects
Source of all data on this page: Company, DBS Bank, Bloomberg
Finance L.P.
Limited upside post share price rally
Investment Thesis:
Raise TP to Rp6,600 but downgrade to HOLD. We bump up
our FY20F/21F EPS by 22%/39% to bake in the tax benefit for
FY20 and our higher nickel price forecasts by 4%/6%. The
stock has outperformed the market and sector by rising
362% and 64% from the trough in Mar and since Nov 2020
respectively. Due to the limited upside even after raising our
TP to Rp6,600, we downgrade our call to HOLD.
2021 earnings to decline due to tax effect and lower sales
volume. We expect Vale Indonesia’s (INCO) earnings in 2021
to decline 7% despite our assumption of 8.7% growth in
nickel prices. This is due to (i) normalising effective tax rates,
and (ii) 8% y-o-y production volume decline due to #4 EAF
reconstruction during May to Nov 2021. But we expect INCO
to continue to register strong results in 4Q20 and 1Q21, as
the impact of reconstruction works has yet to kick in.
Promising long-term growth outlook. INCO will raise its
annual nickel matte capacity to 90k tons p.a. from 75k tons
p.a. currently by upgrading its plant by 2021. Also, upon
completion of its two projects – (i) JV for HPAL plant with 40k
tons p.a. capacity of battery-grade nickel by 2025, and (ii) JV
for NPI plant with 73k tons p.a. capacity of NPI by 2024 –
INCO will produce c.130k tons of Class I nickel and 73k tons
of Class II nickel.
Valuation:
Our TP of Rp6,600 is based on DCF methodology. Our TP of
Rp6,600 is derived from DCF, premised on an 11.4%
weighted average cost of capital (WACC) and 3% terminal
growth.
Where we differ:
Our earnings forecasts are lower than market consensus as
we have factored in output contraction from the replacement
of furnaces and slower production growth from delayed
capacity expansion.
Key Risks to Our View:
Volatile nickel prices and CoW. The Contract of Work (CoW)
with the Indonesian government in 2014 allows INCO to
maintain its concession zones until 2025 upon meeting the
government’s conditions. At A Glance Issued Capital (m shrs) 9,936
Mkt. Cap (Rpm/US$m) 65,828,244 / 4,695 Major Shareholders (%)
VCL 58.7
Sumitomo Metal Mining Co Ltd 20.1
Free Float (%) 21.2
3m Avg. Daily Val (US$m) 11.5
GIC Industry : Materials / Mining
DBS Group Research . Equity
18 Jan 2021
Indonesia Company Update
Vale Indonesia Bloomberg: INCO IJ | Reuters: INCO.JK Refer to important disclosures at the end of this report
Price Relative
Forecasts and Valuation
FY Dec (US$m) 2019A 2020F 2021F 2022F
Revenue 782 790 791 965 EBITDA 221 250 250 314 Pre-tax Profit 89.1 120 112 173 Net Profit 57.4 93.8 87.0 121 Net Pft (Pre Ex.) 57.4 93.8 87.0 121 Net Pft Gth (Pre-ex) (%) (5.1) 63.5 (7.3) 39.4 EPS (Rp) 81.0 132 123 171 EPS Pre Ex. (Rp) 81.0 132 123 171 EPS Gth Pre Ex (%) (5) 63 (7) 39 Diluted EPS (Rp) 81.0 132 123 171 Net DPS (Rp) 0.0 0.0 0.0 0.0 BV Per Share (Rp) 2,740 2,872 2,995 3,166 PE (X) 81.8 50.0 54.0 38.7 PE Pre Ex. (X) 81.8 50.0 54.0 38.7 P/Cash Flow (X) 34.0 17.1 20.5 18.0 EV/EBITDA (X) 20.2 17.2 16.9 13.8 Net Div Yield (%) 0.0 0.0 0.0 0.0 P/Book Value (X) 2.4 2.3 2.2 2.1 Net Debt/Equity (X) CASH CASH CASH CASH ROAE (%) 3.0 4.7 4.2 5.6 Earnings Rev (%): 22 39 23 Consensus EPS (Rp): 140 168 238 Other Broker Recs: B: 15 S: 3 H: 6
61
81
101
121
141
161
181
201
221
241
1,296.0
2,296.0
3,296.0
4,296.0
5,296.0
6,296.0
7,296.0
Jan-17 Jan-18 Jan-19 Jan-20 Jan-21
Relative IndexRp
Vale Indonesia (LHS) Relative JCI (RHS)
Page 12
Company Update
Vale Indonesia
WHAT’S NEW
Time to take a break
2021 earnings to decline due to tax effect and lower sales
volume. We expect INCO’s earnings in 2021 to decline 7%
despite our assumption of 8.7% growth in nickel prices.
This is due to (i) normalising effective tax rates, and (ii) 8%
y-o-y production volume decline due to #4 EAF
reconstruction during May to Nov 2021. The production
volume will decline to 67k tons in 2021 from 72k tons in
2020, as the revamping works require temporary
stoppage of the current production line. However, its
nickel matte capacity will increase to 90k tons from the
current 75k tons after the completion of the
reconstruction.
Strong earnings ahead in 4Q20 and 1Q21. However, we
expect INCO to continue to register strong results in 4Q20
and 1Q21 on the back of strong nickel prices and
operations that would be unaffected by the
reconstruction works yet. LME nickel average prices in
4Q20 surged to US$15,930/ton, up 3.1% y-o-y and 12.1%
q-o-q. We expect its operating profit to increase 16% q-o-
q given its cost competitiveness with low cash cost
(US$6,291/ton for 3Q20) and stable fuel and coal prices.
According to our sensitivity analysis, a 1% hike in nickel
price will increase EBITDA and EPS by 3.3% and 8.2%,
respectively, based on FY20F earnings forecast.
Two major projects to serve earnings growth over the long
term. Promising long-term outlook stems from two major
upcoming projects in Pomalaa and Bahodopi – (i) a JV with
Sumitomo Corp for 40k tons p.a. capacity at HPAL plant to
produce battery-grade nickel (MSP: Mixed Sulphide
Precipitate) in Pomalaa by 2025 with US$2.6bn capex, and
(ii) a JV with a Chinese company for 73k tons p.a. capacity
at NPI plant in Bahodopi by 2024 with US$1.6bn capex.
After the completion of these projects, the company is
expected to produce c.130k tons of Class I nickel and 73k
tons of Class II nickel, which is more than double the 72k
tons of production volume in 2020.
Raise our TP to Rp6,600 but downgrade call to HOLD on
limited upside. We revise up our FY20F/21F EPS by
22%/39% to factor in the tax benefit for FY20 and our
higher nickel price forecasts by 4%/6%. Accordingly, we
raise our TP to Rp6,600 which is based on DCF with 11.4%
WACC and 3% terminal growth, which has been raised
from 1% to take account for its potential growth in EV
battery industry. The stock has outperformed the market
and sector by rising 362% and 64% from the trough in
Mar and since Nov 2020 respectively. We downgrade our
call to HOLD in view of the limited upside even after
raising our TP and positive long-term outlook.
Company Background
The largest nickel maker in Indonesia. INCO is the largest
nickel maker in Indonesia with mines and integrated
smelting and processing capability to produce matte with
high nickel content (78%). Its nickel matte output of 71k
tons accounts for c.3% of global nickel supply. INCO has
four concession areas across Indonesia – Sorowako,
Bahodopi, Pomalaa and Suasua. The company was listed
on the Indonesia Stock Exchange in May 1990.
Page 13
Company Update
Vale Indonesia
Earnings revision
(USD k) Before revision After Revision Change %
2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F
LME nickel prices 13,290 14,200 14,900 13,789 15,000 15,500 4% 6% 4%
Revenue 761,759 748,805 927,147 790,379 790,991 964,482 4% 6% 4%
EBITDA 236,736 228,676 292,773 249,695 249,474 314,297 5% 9% 7%
Gross Profit 122,795 113,126 178,855 136,612 135,401 201,685 11% 20% 13%
Operating profit 99,942 86,918 146,405 112,901 107,716 167,929 13% 24% 15%
Pretax profit 102,750 90,435 151,057 119,709 111,479 173,169 17% 23% 15%
Net profit 77,063 62,400 98,187 93,828 86,954 121,218 22% 39% 23%
Source: Company, DBS Bank estimates
Peer comparison table
Mkt cap PE ratio* P/BV ratio* EV/EBITDA* ROE*
Company Share price US$m 2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F
Aneka Tambang Rp 3,120 1,728 5,316 79.8 63.7 57.5 4.2 4.1 4.0 27.1 24.5 22.8 5.6 6.5
Vale Indonesia Rp 6,650 2,743 4,685 42.8 33.6 27.7 2.3 2.2 2.1 16.9 14.2 13.0 5.2 5.9
Nickel Asia Corp PHP 5.8 1,063 1,650 24.4 24.4 nm 1.2 1.2 nm 8.5 9.9 nm 10.3 nm
Norilsk Nickel RUB 25,910 39,276 55,638 13.0 8.3 9.4 10.9 9.2 8.5 8.6 6.4 6.9 93.1 123.8
Independence Group AU$ 7.1 1,789 4,115 33.1 27.9 26.0 2.0 2.0 2.0 11.2 10.1 10.0 7.9 6.9
Eramet EUR 44.0 756 1,426 nm nm 21.5 1.2 1.1 1.0 8.6 5.1 3.5 (29.0) 5.3
Average 38.6 31.6 28.4 3.6 3.3 3.5 13.5 11.7 11.2 15.5 29.7
Median 33.1 27.9 26.0 2.2 2.1 2.1 9.9 10.0 10.0 6.7 6.5
Source: Bloomberg Finance L.P., DBS Bank
Forecasts based on market consensus
Valuation: DCF
Total PV of FCF (USD k ) 608,283
Terminal value (USD k) 6,973,495
PV of Terminal value (USD k) 3,658,552
Net total debt (USD k) (390,938)
Total value (USD k) 4,757,772
Share outstanding (million shares) 9,936
Value per share (USD) 0.47
Value per share (Rp) 6,600
Forex (IDR/USD) 14,100
Valuation assumption
Risk free rate 3.8%
Risk premium 7%
Stock beta 1.50
Cost of equity 14.3%
Cost of debt 7%
Target debt to equity ratio 40%
WACC 11.4%
Terminal growth rate 3%
Source: Company, DBS Bank estimates
Page 14
Company Update
Vale Indonesia
Historical PE and PB band [Pls always check if PE/ PB band is correctly represented]
Forward PE band (x) PB band (x)
Source: Bloomberg Finance L.P., DBS Bank estimates Source: Bloomberg Finance L.P., DBS Bank estimates
Avg: 36.6x
+1sd: 48.9x
+2sd: 61.3x
-1sd: 24.2x
-2sd: 11.8x8.4
18.4
28.4
38.4
48.4
58.4
68.4
Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21
(x)
Avg: 1.19x
+1sd: 1.45x
+2sd: 1.7x
-1sd: 0.94x
-2sd: 0.69x
0.3
0.8
1.3
1.8
2.3
Jan-17 Jan-18 Jan-19 Jan-20
(x)
Page 15
Company Update
Vale Indonesia
Key Assumptions
FY Dec 2018A 2019A 2020F 2021F 2022F
Sales volume (k tons) 74.8 71.0 72.4 66.6 78.6 LME Nickel price
(US$/ton)
13.1 13.9 13.8 15.0 15.5
ASP(US$/ton) 10.3 10.9 10.8 11.7 12.1 Average price of
HSFO(US$/bbl) 0.10 0.10 0.10 0.10 0.10
Segmental Breakdown
FY Dec 2018A 2019A 2020F 2021F 2022F Revenues (US$m)
Nickel Matt 777 782 790 791 965
Total 777 782 790 791 965 (US$m)
Nickel Matt 104 117 137 135 202
Total 104 117 137 135 202 Margins (%)
Nickel Matt 13.4 14.9 17.3 17.1 20.9
Total 13.4 14.9 17.3 17.1 20.9
Income Statement (US$m)
FY Dec 2018A 2019A 2020F 2021F 2022F
Revenue 777 782 790 791 965 Cost of Goods Sold (673) (666) (654) (656) (763)
Gross Profit 104 117 137 135 202 Other Opng (Exp)/Inc (19.1) (28.2) (23.7) (27.7) (33.8)
Operating Profit 84.9 88.3 113 108 168 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 0.0 0.0 0.0 0.0 0.0 Net Interest (Exp)/Inc (2.2) 0.80 6.80 3.80 5.20 Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0
Pre-tax Profit 82.6 89.1 120 112 173 Tax (22.1) (31.7) (25.9) (24.5) (52.0)
Minority Interest 0.0 0.0 0.0 0.0 0.0 Preference Dividend 0.0 0.0 0.0 0.0 0.0
Net Profit 60.5 57.4 93.8 87.0 121 Net Profit before Except. 60.5 57.4 93.8 87.0 121 EBITDA 214 221 250 250 314 Growth
Revenue Gth (%) 23.4 0.7 1.1 0.1 21.9 EBITDA Gth (%) 96.8 3.1 13.3 (0.1) 26.0 Opg Profit Gth (%) (572.0) 4.0 27.9 (4.6) 55.9 Net Profit Gth (Pre-ex) (%) nm (5.1) 63.5 (7.3) 39.4
Margins & Ratio Gross Margins (%) 13.4 14.9 17.3 17.1 20.9 Opg Profit Margin (%) 10.9 11.3 14.3 13.6 17.4 Net Profit Margin (%) 7.8 7.3 11.9 11.0 12.6 ROAE (%) 3.3 3.0 4.7 4.2 5.6 ROA (%) 2.8 2.6 4.1 3.6 4.8 ROCE (%) 3.0 2.7 4.2 3.8 5.1 Div Payout Ratio (%) 0.0 0.0 0.0 0.0 0.0 Net Interest Cover (x) 37.9 NM NM NM NM
Source: Company, DBS Bank
Page 16
Company Update
Vale Indonesia
Quarterly Income Statement (US$m)
FY Dec 3Q2019 4Q2019 1Q2020 2Q2020 3Q2020
Revenue 214 276 175 186 211 Cost of Goods Sold (170) (180) (154) (166) (166)
Gross Profit 43.8 95.4 20.5 20.1 44.4 Other Oper. (Exp)/Inc (7.5) (8.0) (2.4) 0.50 (12.3)
Operating Profit 36.3 87.4 18.1 20.6 32.1 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 0.0 0.0 0.0 0.0 0.0 Net Interest (Exp)/Inc 0.0 0.70 5.00 0.50 0.10 Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0
Pre-tax Profit 36.2 88.1 23.0 21.1 32.2 Tax (9.9) (30.9) 5.90 3.10 (8.7) Minority Interest 0.0 0.0 0.0 0.0 0.0
Net Profit 26.3 57.2 29.0 24.2 23.5 Net profit bef Except. 26.3 57.2 29.0 24.2 23.5 EBITDA 76.0 124 48.7 61.2 70.6
Growth Revenue Gth (%) 29.2 28.6 (36.6) 6.3 13.4 EBITDA Gth (%) 352.8 62.9 (60.7) 25.7 15.4 Opg Profit Gth (%) (556.2) 141.1 (79.3) 14.0 55.7 Net Profit Gth (Pre-ex) (%) (537.8) 117.3 (49.4) (16.5) (2.7)
Margins
Gross Margins (%) 20.4 34.6 11.7 10.8 21.1 Opg Profit Margins (%) 16.9 31.7 10.3 11.1 15.2 Net Profit Margins (%) 12.3 20.8 16.6 13.0 11.2
Balance Sheet (US$m)
FY Dec 2018A 2019A 2020F 2021F 2022F Net Fixed Assets 1,435 1,468 1,461 1,459 1,443 Invts in Associates & JVs 0.0 0.0 0.0 0.0 0.0 Other LT Assets 137 167 167 167 434 Cash & ST Invts 301 249 391 476 351
Inventory 132 148 145 146 170 Debtors 124 107 108 109 132 Other Current Assets 73.8 84.0 84.9 85.0 104
Total Assets 2,203 2,223 2,357 2,441 2,633
ST Debt
36.5 0.0 0.0 0.0 0.0
Creditor 91.2 97.4 115 115 140 Other Current Liab 47.6 39.1 65.5 66.5 100
LT Debt 0.0 0.0 0.0 0.0 0.0 Other LT Liabilities 143 144 141 137 149 Shareholder’s Equity 1,884 1,942 2,036 2,123 2,244 Minority Interests 0.0 0.0 0.0 0.0 0.0
Total Cap. & Liab. 2,203 2,223 2,357 2,441 2,633 Non-Cash Wkg. Capital 191 203 158 158 165 Net Cash/(Debt) 265 249 391 476 351 Debtors Turn (avg days) 65.7 54.0 49.8 50.1 45.6 Creditors Turn (avg days) 51.0 64.5 75.0 81.7 75.6 Inventory Turn (avg days) 83.7 95.7 103.5 103.4 93.4 Asset Turnover (x) 0.4 0.4 0.3 0.3 0.4 Current Ratio (x) 3.6 4.3 4.0 4.5 3.1 Quick Ratio (x) 2.4 2.6 2.8 3.2 2.0 Net Debt/Equity (X) CASH CASH CASH CASH CASH Net Debt/Equity ex MI (X) CASH CASH CASH CASH CASH
Capex to Debt (%) 96.3 N/A N/A N/A N/A Source: Company, DBS Bank
Page 17
Company Update
Vale Indonesia
Cash Flow Statement (US$m)
FY Dec 2018A 2019A 2020F 2021F 2022F
Pre-Tax Profit 82.6 89.1 120 112 173 Dep. & Amort. 129 132 137 142 146 Tax Paid (22.1) (31.7) (25.9) (24.5) (52.0)
Assoc. & JV Inc/(loss) 0.0 0.0 0.0 0.0 0.0 Chg in Wkg.Cap. 91.5 (27.3) 44.5 0.50 (7.5) Other Operating CF 0.0 0.0 0.0 0.0 0.0
Net Operating CF 204 138 275 229 260 Capital Exp.(net) (35.2) (125) (130) (140) (397) Other Invts.(net) 0.0 0.0 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0 Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0 Other Investing CF (48.6) (40.8) 0.0 0.0 0.0
Net Investing CF (83.8) (166) (130) (140) (397) Div Paid 0.0 0.0 0.0 0.0 0.0 Chg in Gross Debt (36.5) (36.5) 0.0 0.0 0.0
Capital Issues 0.0 0.0 0.0 0.0 0.0 Other Financing CF (3.9) 12.1 (3.2) (3.8) 11.6
Net Financing CF (40.4) (24.4) (3.2) (3.8) 11.6 Currency Adjustments 0.0 0.0 0.0 0.0 0.0 Chg in Cash 80.1 (52.5) 142 85.4 (125) Opg CFPS (Rp) 159 233 325 323 378
Free CFPS (Rp) 239 17.9 205 126 (193)
Source: Company, DBS Bank
Target Price & Ratings History
Source: DBS Bank
Analyst: LEE Eun Young
S.No.Date of
Report
Clos ing
Price
12-mth
Target
Price
Rating
1: 25 Feb 20 3000 3300 HOLD
2: 06 Mar 20 2570 3300 BUY
3: 30 Apr 20 2570 2900 BUY
4: 30 Jul 20 3420 3800 BUY
5: 15 Sep 20 3950 4400 BUY
6: 02 Nov 20 4270 4700 BUY
Note : Share price and Target price are adjusted for corporate actions.
1
2
3
45
6
1368
2368
3368
4368
5368
6368
Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21
Rp
Company Update
Vale Indonesia
DBS Bank recommendations are based on an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return, i.e., > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable share price catalysts within this time frame)
*Share price appreciation + dividends
Completed Date: 15 Jan 2021 20:48:44 (WIB)
Dissemination Date: 18 Jan 2021 07:25:07 (WIB)
Sources for all charts and tables are DBS Bank unless otherwise specified.
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte
Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or
duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to
DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents
(collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into
account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any
representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are
subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does
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Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and
there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or
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This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no
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The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates
and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the
estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary
significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments
described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with
the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or
risk assessments stated therein.
Page 18
Company Update
Vale Indonesia
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
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Page 19
ed: CK/ sa: xx, PY, CS
FULLY VALUED (Downgrade from BUY)
Last Traded Price (14 Jan 2021): Rp3,180 (JCI : 6,428.30) Price Target 12-mth: Rp2,700 (15% downside) (Prev Rp1,450)
Analyst
LEE Eun Young +65 6682 3708 [email protected]
What’s New • Raise TP to Rp2,700, but downgrade call to FULLY
VALUED
• Becoming a key player in EV battery value chain in
Indonesia
• Strong earnings growth in 2021, backed by more
than doubling of nickel ore sales volume
• 201% share price surge since Nov to stimulate desire
to take profit
Source of all data on this page: Company, DBS Bank, Bloomberg Finance
L.P.
Promising outlook but share price went too far
Investment Thesis:
Raise TP to Rp2,700 but downgrade to FULLY VALUED. We
bump up our FY20F/21F EPS by 33%/94% to factor in our
higher nickel price forecasts by 4%/6% and higher nickel ore
sales volume. Taking into account its potential growth in the
EV battery industry, we raise our terminal growth rate to 5%
from 1% previously to derive to our new TP. The stock has
outperformed the market and sector by rising 814% and
201% from the trough in Mar and since Nov 2020
respectively. Due to the downside potential even after raising
our TP to Rp2,700, we downgrade our call to FULLY VALUED.
Becoming a key player in EV battery value chain in Indonesia.
Backed by its ample nickel reserves that account for 25% of
the total reserves in Indonesia, ANTM will be a key participant
in PT Indonesia Battery Holdings – having signed an MOU
with the largest two EV battery makers, CATL in China and LG
Group in Korea to supply nickel to their battery plants to be
built in Indonesia.
Strong earnings growth on higher nickel ore sales and
ferronickel capacity expansion. Its nickel ore sales in 2021
are expected to more than double given (i) the government’s
introduction of benchmark pricing (HPM) to set the floor
price for domestic nickel ore, and (ii) refined nickel output
growth in its clients. In addition, its ferronickel capacity is
expected to grow by 13.5k tonnes to 40.5k tonnes p.a. upon
completion of its ferronickel plant in East Halmahera in 2022.
Valuation:
TP of Rp2,700 based on DCF model. To factor in the growth of long-term free cash flow, our target price (TP) is derived from DCF model, premised on 11.6% weighted average cost of capital (WACC) and 5% terminal growth.
Where we differ:
We are more optimistic than consensus for earnings forecasts due to the expected nickel ore sales growth that the market has yet to factor in.
Key Risks to Our View:
Volatile nickel prices. A sharp contraction in demand for
nickel and downturn in London Metal Exchange (LME) nickel
prices would pose major downside risks as ANTM’s sales
prices are pegged to LME nickel prices. At A Glance Issued Capital (m shrs) 24,031
Mkt. Cap (Rpbn/US$m) 76,418 / 5,436
Major Shareholders (%)
Republic of Indonesia (%) 65%
Free Float (%) 35%
3m Avg. Daily Val (US$m) 74.7
GIC Industry : Materials / Mining
DBS Group Research . Equity
15 Jan 2021
Indonesia Company Update
Aneka Tambang Bloomberg: ANTM IJ | Reuters: ANTM.JK Refer to important disclosures at the end of this report
Price Relative
Forecasts and Valuation
FY Dec (Rpbn) 2019A 2020F 2021F 2022F
Revenue 32,719 27,042 30,032 29,325 EBITDA 1,919 3,245 4,790 5,276 Pre-tax Profit 687 1,790 3,236 3,630 Net Profit 194 1,163 2,104 2,360 Net Pft (Pre Ex.) 194 1,163 2,104 2,360 Net Pft Gth (Pre-ex) (%) (88.2) 500.1 80.8 12.2 EPS (Rp) 8.07 48.4 87.5 98.2 EPS Pre Ex. (Rp) 8.07 48.4 87.5 98.2 EPS Gth Pre Ex (%) (88) 500 81 12 Diluted EPS (Rp) 8.07 48.4 87.5 98.2 Net DPS (Rp) 0.0 0.0 0.0 0.0 BV Per Share (Rp) 755 802 889 986 PE (X) 394.2 65.7 36.3 32.4 PE Pre Ex. (X) 394.2 65.7 36.3 32.4 P/Cash Flow (X) 46.8 26.9 24.5 20.9 EV/EBITDA (X) 42.5 25.3 17.2 15.6 Net Div Yield (%) 0.0 0.0 0.0 0.0 P/Book Value (X) 4.2 4.0 3.6 3.2 Net Debt/Equity (X) 0.3 0.3 0.3 0.3 ROAE (%) 1.1 6.2 10.4 10.5 Earnings Rev (%): 33 94 91 Consensus EPS (Rp): 42.5 52.7 57.6 Other Broker Recs: B: 15 S: 0 H: 3
45
95
145
195
245
295
313.2
813.2
1,313.2
1,813.2
2,313.2
2,813.2
3,313.2
Jan-17 Jan-18 Jan-19 Jan-20 Jan-21
Relative IndexRp
Aneka Tambang (LHS) Relative JCI (RHS)
Page 19
Company Update
Aneka Tambang
WHAT’S NEW
Stimulating desire to take profit
Becoming a key player in EV battery value chain in
Indonesia. Backed by its ample nickel reserves that
account for 25% of the total reserves in Indonesia, ANTM
will be a key member of PT Indonesia Battery Holdings –
having signed an MOU with the two largest EV battery
makers, CATL in China and LG Group in Korea to supply
nickel to their battery plants to be built in Indonesia.
Oct 2020: PT Indonesia Battery Holding, would be formed
by state miners MIND ID and Aneka Tambang (ANTAM),
state utility Perusahan Listrik Negara (PLN) and state oil
company PT Pertamina. Indonesia is also in talks with
China’s CATL and South Korea’s LG Chem, the world’s top
two EV battery makers by output, to invest between
US$12bn and US$20bn in developing the dream supply
chain. PT Indonesia Battery Holding aims to produce
between eight and 10 gigawatt hours (GWh) worth of
batteries each year, kicking off operations around two to
three years from now (as reported by Jakarta Post).
Mining Industry Indonesia (MIND ID) is Indonesia's mining
industry holding company comprising PT ANTAM Tbk, PT Bukit
Asam, PT Freeport Indonesia, PT Indonesia Asahan Aluminium
(Persero), and PT Timah Tbk.
16 Dec 2020: MOU with CATL. Contemporary Amperex
Technology (CATL) plans to build a US$5bn lithium battery
factory in Indonesia, ramping up its capacity amid growing
demand for electric vehicles. The government official said
that a deal between China-based CATL and Indonesian
state miner PT Aneka Tambang has been inked i to ensure
that 60% of its mined nickel goes into batteries in
Indonesia (as reported by Reuters).
30 Dec 2020: Indonesia says US$9.8bn EV battery MOU
agreed with LG Energy Solution. Indonesia and LG Energy
Solution signed an MOU for an EV battery investment deal
worth US$9.8bn on 18 Dec. At least 70% of the nickel ore
to produce the EV batteries should be processed in
Indonesia, according to the MOU (as reported by Reuters).
Earnings growth on higher nickel ore sales and capacity
expansion of ferronickel. Its nickel ore sales volume in
2021 is expected to be 6m wmt which is c.3 times of that in
2020 given (i) the government’s introduction of benchmark
pricing (HPM) to set the floor price for domestic nickel ore,
and (ii) production growth of refined nickel in its clients
(Tsingshan and PT Virtue Dragon). Tsingshan plans to
increase its capacity by 78k tonnes to 360k tonnes p.a. by
the end of this year by adding eight more rotary kiln–
electric arc furnace (RKEF) lines. PT Virtue Dragon, a
subsidiary of Delong Steel, will increase its capacity by 50k
tonnes to 160k tonnes p.a. in 2020, and by 35k tonnes to
195k tonnes p.a. in 2021. Note that ANTM’s sales volume
of nickel ore in 2020 would be 2m wmt, representing a
decline of 74% y-o-y due to the export ban on ore and
price dumping in the domestic market before the
implementation of HPM.
In addition, its ferronickel capacity is expected to grow by
13.5k tonnes to 40.5k tonnes p.a. upon completion of its
ferronickel plant in East Halmahera in 2022.
Raise TP to Rp2,700 but downgrade to FULLY VALUED. We
revise up our FY20F/21F EPS by 33%/94% to factor in our
higher nickel price forecasts by 4%/6%. Taking into account
its potential growth in the EV battery industry, we raise our
terminal growth rate to 5% from 1% previously to derive to
our new TP of Rp2,700. This implies 3x P/BV and 31x PE,
based on FY21F earnings forecast. The stock has
outperformed the market and sector by rising 814% and
201% from the trough in Mar and since Nov 2020
respectively. Due to the downside potential even after
raising our TP to Rp2,700, we downgrade our call to FULLY
VALUED.
Page 20
Company Update
Aneka Tambang
Company Background
ANTM was established on 5 July 1968 through a merger of
several state mining entities. It is a vertically integrated
company which performs exploration, excavation,
processing and marketing of nickel ore, ferronickel, gold,
silver, bauxite and coal. PT Inalum owns a 65% stake in the
company while the remaining 35% stake is owned by the
public.
Earnings revision
(Rp bn) Before revision After Revision Change %
2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F
LME nickel
prices(US$/ton) 13,290 14,200 14,900 13,789 15,000 15,500 4% 6% 4%
Revenue 26,821 27,617 26,415 27,042 30,032 29,325 1% 9% 11%
EBITDA 3,044 3,406 3,688 3,531 4,936 5,435 16% 45% 47%
Operating profit 2,024 2,306 2,539 2,511 3,836 4,231 24% 66% 67%
Pretax profit 1,343 1,666 1,898 1,790 3,236 3,630 33% 94% 91%
Net profit 873 1,083 1,234 1,163 2,103 2,360 33% 94% 91%
Source: Company, DBS Bank estimates
Peer comparison table Mkt cap PE ratio* P/BV ratio* EV/EBITDA* ROE*
Company Share price US$m 2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F
Aneka Tambang Rp 3,120 1,728 5,316 79.8 63.7 57.5 4.2 4.1 4.0 27.1 24.5 22.8 5.6 6.5
Vale Indonesia Rp 6,650 2,743 4,685 42.8 33.6 27.7 2.3 2.2 2.1 16.9 14.2 13.0 5.2 5.9
Nickel Asia Corp PHP 5.8 1,063 1,650 24.4 24.4 nm 1.2 1.2 nm 8.5 9.9 nm 10.3 nm
Norilsk Nickel RUB 25,910 39,276 55,638 13.0 8.3 9.4 10.9 9.2 8.5 8.6 6.4 6.9 93.1 123.8
Independence Group AU$ 7.1 1,789 4,115 33.1 27.9 26.0 2.0 2.0 2.0 11.2 10.1 10.0 7.9 6.9
Eramet EUR 44.0 756 1,426 nm nm 21.5 1.2 1.1 1.0 8.6 5.1 3.5 (29.0) 5.3
Average 38.6 31.6 28.4 3.6 3.3 3.5 13.5 11.7 11.2 15.5 29.7
Median 33.1 27.9 26.0 2.2 2.1 2.1 9.9 10.0 10.0 6.7 6.5
Source: Bloomberg Finance L.P., DBS Bank
Forecasts based on market consensus
Page 21
Company Update
Aneka Tambang
Valuation: DCF
Total PV of FCF (Rp bn) 9,216
Terminal value (Rp bn) 32,989
PV of Terminal value (Rp bn) 13,750
Net total debt (Rp bn) (2,518)
Total value (Rp billion) 25,483
Share outstanding (million shares) 9,538
Value per share (Rp) 2,700
Valuation assumption
Risk free rate 3.8%
Risk premium 7.0%
Stock beta 1.6
Cost of equity 14.6%
Cost of debt 7.0%
Target debt to equity ratio 40.0%
WACC 11.6%
Terminal growth rate 5.0%
Source: Company, DBS Bank estimates
Historical PE and PB band
Forward PE band (x) PB band (x)
Source: Bloomberg Finance L.P., DBS Bank estimates Source: Bloomberg Finance L.P., DBS Bank estimates
Avg: 26.4x
+1sd: 46.1x
+2sd: 65.9x
-1sd: 6.6x
-11.8
8.2
28.2
48.2
68.2
88.2
108.2
Jan-17 Jan-18 Jan-19 Jan-20
(x)
Avg: 1.09x+1sd: 1.41x+2sd: 1.73x
-1sd: 0.76x-2sd: 0.44x
0.3
0.8
1.3
1.8
2.3
2.8
3.3
3.8
4.3
Jan-17 Jan-18 Jan-19 Jan-20
(x)
Page 22
Company Update
Aneka Tambang
Key Assumptions
FY Dec 2018A 2019A 2020F 2021F 2022F
LME Nickel
prices(US$/ton)
13,122 13,936 13,789 15,000 15,500 Gold prices(US$/oz) 1,269 1,393 1,774 1,810 1,629
LME Aluminium
Prices(US$/ton)
2,110 1,791 1,666 1,799 1,889 Forex(IDR/US$) 14,243 14,141 14,800 14,500 14,200
Segmental Breakdown
FY Dec 2018A 2019A 2020F 2021F 2022F Revenues (Rpbn) Ferronickel 4,668 4,871 5,100 5,538 6,227 Nickel ore 2,934 3,706 1,015 3,247 3,943
Gold 16,706 22,466 20,241 20,227 17,828 Others 967 1,675 686 1,020 1,328
Total 25,275 32,719 27,042 30,032 29,325 Sales volume
Ferronickel (tons) 24,135 26,212 26,500 27,000 30,000 Nickel ore (k wmt) 6,335 7,559 2,000 6,000 7,200
Gold (kg) 27,894 34,016 23,000 23,000 23,000
ASP
Ferronickel (US$/ton) 13,581 13,142 13,004 14,145 14,617 Nickel ore (US$/wmt) 32.5 34.7 34.3 37.3 38.6 Gold (US$/oz) 1,308 1,453 1,849 1,886 1,698
Income Statement (Rpbn)
FY Dec 2018A 2019A 2020F 2021F 2022F
Revenue 25,275 32,719 27,042 30,032 29,325 Cost of Goods Sold (20,613) (28,271) (22,395) (23,583) (22,161)
Gross Profit 4,662 4,447 4,647 6,449 7,164 Other Opng (Exp)/Inc (3,106) (3,492) (2,136) (2,613) (2,933)
Operating Profit 1,556 956 2,511 3,836 4,231 Other Non Opg (Exp)/Inc 2,587 (67.6) (186) (85.8) (100.0) Associates & JV Inc (1,260) (88.1) (100.0) (60.0) (60.0) Net Interest (Exp)/Inc (870) (113) (435) (454) (441)
Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0
Pre-tax Profit 2,013 687 1,790 3,236 3,630 Tax (377) (493) (626) (1,133) (1,271) Minority Interest 0.0 0.0 0.0 0.0 0.0 Preference Dividend 0.0 0.0 0.0 0.0 1.00
Net Profit 1,636 194 1,163 2,104 2,360 Net Profit before Except. 1,636 194 1,163 2,104 2,360 EBITDA 3,735 1,919 3,245 4,790 5,276 Growth Revenue Gth (%) 99.7 29.4 (17.3) 11.1 (2.4) EBITDA Gth (%) 127.0 (48.6) 69.1 47.6 10.1
Opg Profit Gth (%) 159.1 (38.6) 162.7 52.8 10.3
Net Profit Gth (Pre-ex) (%) 1,098.5 (88.2) 500.1 80.8 12.2 Margins & Ratio Gross Margins (%) 18.4 13.6 17.2 21.5 24.4 Opg Profit Margin (%) 6.2 2.9 9.3 12.8 14.4 Net Profit Margin (%) 6.5 0.6 4.3 7.0 8.0 ROAE (%) 9.2 1.1 6.2 10.4 10.5 ROA (%) 5.4 0.6 3.8 6.5 6.8 ROCE (%) 4.4 0.9 5.7 8.2 8.4 Div Payout Ratio (%) 0.0 0.0 0.0 0.0 0.0 Net Interest Cover (x) 1.8 8.5 5.8 8.5 9.6
Source: Company, DBS Bank
Page 23
Company Update
Aneka Tambang
Quarterly Income Statement (Rpbn)
FY Dec 3Q2019 4Q2019 1Q2020 2Q2020 3Q2020
Revenue 10,131 8,161 5,203 4,024 8,811 Cost of Goods Sold (8,900) (7,093) (4,641) (3,276) (7,216)
Gross Profit 1,231 1,069 562 747 1,595 Other Oper. (Exp)/Inc (722) (1,354) (424) (433) (606)
Operating Profit 509 (285) 138 314 989 Other Non Opg (Exp)/Inc (23.3) (41.3) 681 (638) 318 Associates & JV Inc (8.3) (14.5) 6.10 (36.6) 5.50 Net Interest (Exp)/Inc (127) 37.2 (1,161) 830 (327) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0
Pre-tax Profit 350 (304) (337) 469 985 Tax (137) (144) 54.6 (103) (234)
Minority Interest 0.0 0.0 0.0 0.0 0.0
Net Profit 214 (448) (282) 367 751 Net profit bef Except. 214 (448) (282) 367 751 EBITDA 477 (341) 824 (361) 1,312
Growth Revenue Gth (%) 23.4 (19.4) (36.3) (22.7) 119.0 EBITDA Gth (%) 14.9 nm nm nm nm Opg Profit Gth (%) 13.4 (156.1) (148.2) 128.2 215.1 Net Profit Gth (Pre-ex) (%) (15.2) (309.7) (37.0) (230.1) 104.8
Margins
Gross Margins (%) 12.2 13.1 10.8 18.6 18.1 Opg Profit Margins (%) 5.0 (3.5) 2.6 7.8 11.2 Net Profit Margins (%) 2.1 (5.5) (5.4) 9.1 8.5
Balance Sheet (Rpbn)
FY Dec 2018A 2019A 2020F 2021F 2022F Net Fixed Assets 19,490 18,866 20,345 22,245 24,542 Invts in Associates & JVs 0.0 0.0 0.0 0.0 0.0 Other LT Assets 5,364 3,664 4,619 5,119 5,163 Cash & ST Invts 4,299 3,636 3,002 2,800 3,094
Inventory 1,846 1,796 1,370 1,443 1,356 Debtors 944 1,002 643 715 698 Other Current Assets 254 1,230 1,243 1,255 1,268
Total Assets 32,195 30,195 31,223 33,577 36,120
ST Debt
2,891 3,193 3,193 3,263 3,333
Creditor 868 740 586 617 580 Other Current Liab 1,804 1,361 1,388 1,416 1,444 LT Debt 7,348 5,564 5,564 5,694 5,824 Other LT Liabilities 838 1,204 1,216 1,228 1,242 Shareholder’s Equity 18,448 18,133 19,276 21,359 23,698
Minority Interests 0.0 0.0 0.0 0.0 0.0
Total Cap. & Liab. 32,195 30,195 31,223 33,577 36,121 Non-Cash Wkg. Capital 372 1,928 1,282 1,380 1,297 Net Cash/(Debt) (5,939) (5,120) (5,755) (6,157) (6,063) Debtors Turn (avg days) 13.8 10.9 11.1 8.3 8.8 Creditors Turn (avg days) 11.0 10.8 11.3 9.8 10.4 Inventory Turn (avg days) 27.2 24.5 27.0 22.8 24.4 Asset Turnover (x) 0.8 1.0 0.9 0.9 0.8 Current Ratio (x) 1.3 1.4 1.2 1.2 1.2 Quick Ratio (x) 0.9 0.9 0.7 0.7 0.7 Net Debt/Equity (X) 0.3 0.3 0.3 0.3 0.3 Net Debt/Equity ex MI (X) 0.3 0.3 0.3 0.3 0.3
Capex to Debt (%) 68.8 5.7 28.5 33.5 38.2 Z-Score (X) NA NA NA NA NA
Source: Company, DBS Bank
Page 24
Company Update
Aneka Tambang
Cash Flow Statement (Rpbn)
FY Dec 2018A 2019A 2020F 2021F 2022F
Pre-Tax Profit 2,013 687 1,790 3,236 3,630 Dep. & Amort. 852 1,119 1,020 1,100 1,203 Tax Paid (377) (493) (626) (1,133) (1,271)
Assoc. & JV Inc/(loss) 0.0 0.0 0.0 0.0 1.00 Chg in Wkg.Cap. 0.0 0.0 0.0 0.0 0.0 Other Operating CF (613) 321 658 (85.2) 93.7
Net Operating CF 1,875 1,634 2,842 3,119 3,658 Capital Exp.(net) (7,043) (495) (2,500) (3,000) (3,500) Other Invts.(net) 1,379 401 (956) (500) (44.0)
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0 Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0
Other Investing CF 3,070 (791) 0.0 0.0 0.0
Net Investing CF (2,594) (885) (3,456) (3,500) (3,544) Div Paid 0.0 0.0 0.0 0.0 0.0 Chg in Gross Debt 724 (1,482) 0.0 200 200
Capital Issues 0.0 0.0 0.0 0.0 0.0 Other Financing CF (1,344) 118 (20.5) (20.5) (20.5)
Net Financing CF (620) (1,363) (20.5) 180 180 Currency Adjustments 87.4 (48.2) 0.0 0.0 0.0 Chg in Cash (1,252) (663) (634) (202) 293 Opg CFPS (Rp) 78.0 68.0 118 130 152
Free CFPS (Rp) (215) 47.4 14.2 4.93 6.56
Source: Company, DBS Bank
Target Price & Ratings History
Source: DBS Bank
Analyst: LEE Eun Young
S.No.Date of
Report
Clos ing
Price
12-mth
Target
Price
Rat ing
1: 20 Apr 20 500 730 BUY
2: 21 Apr 20 482 730 BUY
3: 30 Jun 20 605 730 BUY
4: 04 Aug 20 705 800 BUY
5: 16 Sep 20 795 900 BUY
6: 02 Nov 20 1100 1450 BUY
Note : Share price and Target price are adjusted for corporate actions.
1
2
3
45
6
330
830
1330
1830
2330
2830
3330
Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21
Rp
Company Update
Aneka Tambang
DBS Bank recommendations are based on an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return, i.e., > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable share price catalysts within this time frame)
*Share price appreciation + dividends
Completed Date: 15 Jan 2021 17:30:37 (WIB)
Dissemination Date: 18 Jan 2021 17:05:32 (WIB)
Sources for all charts and tables are DBS Bank unless otherwise specified.
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte
Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or
duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to
DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents
(collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into
account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any
representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are
subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does
not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document
is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should
obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or
consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further
communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell
any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in
the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned
herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and
there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or
risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete
or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS
Group is under no obligation to update the information in this report.
This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no
planned schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates
and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the
estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary
significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments
described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with
the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or
risk assessments stated therein.
Page 27
Company Update
Aneka Tambang
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating
to the commodity referred to in this report.
DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any
public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does
not engage in market-making.
ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of
his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The
research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does
not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the
management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of
the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily
responsible for the content of this research report or his associate does not have financial interests2 in relation to an issuer or a new
listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of
interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates
as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure
that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of
DBS Group's compensation to any specific investment banking function of the DBS Group.
COMPANY-SPECIFIC / REGULATORY DISCLOSURES
1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates do not
have a proprietary position in the securities recommended in this report as of 30 Dec 2020.
2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this
Research Report.
Compensation for investment banking services:
3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of
securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US
persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a
transaction in any security discussed in this document should contact DBSVUSA exclusively.
Disclosure of previous investment recommendation produced:
4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have
published other investment recommendations in respect of the same securities / instruments recommended in this research
report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view
previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their
subsidiaries and/or other affiliates in the preceding 12 months.
1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust
of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another
person accustomed or obliged to act in accordance with the directions or instructions of the analyst.
2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an
issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or
analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme
other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer
or a new listing applicant.
Page 28
Industry Focus
Nickel
Page 11
DBS Bank recommendations are based on an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return, i.e., > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable share price catalysts within this time frame)
*Share price appreciation + dividends
Completed Date: 19 Jan 2021 07:11:03 (SGT)
Dissemination Date: 19 Jan 2021 07:58:16 (SGT)
Sources for all charts and tables are DBS Bank unless otherwise specified.
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte
Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or
duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to
DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents
(collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into
account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any
representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are
subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does
not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document
is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should
obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or
consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further
communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell
any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in
the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned
herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and
there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or
risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete
or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS
Group is under no obligation to update the information in this report.
This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no
planned schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates
and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the
estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary
significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments
described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with
the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or
risk assessments stated therein.
Page 29
Industry Focus
Nickel
Page 12
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating
to the commodity referred to in this report.
DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any
public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does
not engage in market-making.
ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the
companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of
his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The
research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does
not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the
management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the
entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for
the content of this research report or his associate does not have financial interests2 in relation to an issuer or a new listing applicant that
the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in
connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and
independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential
information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's
compensation to any specific investment banking function of the DBS Group.
COMPANY-SPECIFIC / REGULATORY DISCLOSURES
1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates do not
have a proprietary position in the securities recommended in this report as of 30 Nov 2020.
2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this
Research Report.
Compensation for investment banking services:
3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of
securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US
persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a
transaction in any security discussed in this document should contact DBSVUSA exclusively.
Disclosure of previous investment recommendation produced:
4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have
published other investment recommendations in respect of the same securities / instruments recommended in this research
report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view
previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their
subsidiaries and/or other affiliates in the preceding 12 months.
1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust
of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another
person accustomed or obliged to act in accordance with the directions or instructions of the analyst.
2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an
issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or
analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme
other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer
or a new listing applicant.
Page 30
Industry Focus
Nickel
Page 13
RESTRICTIONS ON DISTRIBUTION
General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or
resident of or located in any locality, state, country or other jurisdiction where such distribution, publication,
availability or use would be contrary to law or regulation.
Australia This report is being distributed in Australia by DBS Bank Ltd, DBSVS or DBSV HK. DBS Bank Ltd holds Australian
Financial Services Licence no. 475946.
DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under
the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS Bank Ltd and
DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is
regulated by the Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from
Australian laws.
Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.
Hong Kong This report is being distributed in Hong Kong by DBS Bank Ltd, DBS Bank (Hong Kong) Limited and DBS Vickers
(Hong Kong) Limited, all of which are registered with or licensed by the Hong Kong Securities and Futures
Commission to carry out the regulated activity of advising on securities. DBS Bank Ltd., Hong Kong Branch is a
limited liability company incorporated in Singapore.
Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.
Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report,
received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in
connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page,
recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance
Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers,
employees, agents and parties related or associated with any of them may have positions in, and may effect
transactions in the securities mentioned herein and may also perform or seek to perform broking, investment
banking/corporate advisory and other services for the subject companies. They may also have received
compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other
services from the subject companies.
Wong Ming Tek, Executive Director, ADBSR
Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company
Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and
regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced
by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under
Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who
is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility
for the contents of the report to such persons only to the extent required by law. Singapore recipients should
contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.
Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd.
Page 31
Industry Focus
Nickel
Page 14
United
Kingdom
This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore.
This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is
authorised and regulated by the Financial Conduct Authority in the United Kingdom.
In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected
and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or
duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This
communication is directed at persons having professional experience in matters relating to investments. Any
investment activity following from this communication will only be engaged in with such persons. Persons who do
not have professional experience in matters relating to investments should not rely on this communication.
Dubai
International
Financial
Centre
This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at units 608 - 610, 6th
Floor, Gate Precinct Building 5, PO Box 506538, DIFC, Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is
regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients
(as defined in the DFSA rulebook) and no other person may act upon it.
United Arab
Emirates
This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as
defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for
information purposes only and should not be relied upon or acted on by the recipient or considered as a
solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation
or take into account the particular investment objectives, financial situation, or needs of individual clients. You
should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling
or holding a particular investment. You should note that the information in this report may be out of date and it is
not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be
reprinted, sold or redistributed without our written consent.
United States This report was prepared by DBS Bank Ltd. DBSVUSA did not participate in its preparation. The research
analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons
of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation,
communications with a subject company, public appearances and trading securities held by a research analyst.
This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This
report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other
institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who
wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its
affiliate.
Other
jurisdictions
In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for
qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such
jurisdictions.
Page 32
Industry Focus
Nickel
Page 15
DBS Regional Research Offices
HONG KONG
DBS (Hong Kong) Ltd
Contact: Carol Wu
13th Floor One Island East,
18 Westlands Road,
Quarry Bay, Hong Kong
Tel: 852 3668 4181
Fax: 852 2521 1812
e-mail: [email protected]
MALAYSIA
AllianceDBS Research Sdn Bhd
Contact: Wong Ming Tek
19th Floor, Menara Multi-Purpose,
Capital Square,
8 Jalan Munshi Abdullah 50100
Kuala Lumpur, Malaysia.
Tel.: 603 2604 3333
Fax: 603 2604 3921
e-mail: [email protected]
Co. Regn No. 198401015984
(128540-U)
SINGAPORE
DBS Bank Ltd
Contact: Janice Chua
12 Marina Boulevard,
Marina Bay Financial Centre Tower 3
Singapore 018982
Tel: 65 6878 8888
e-mail: [email protected]
Company Regn. No. 196800306E
THAILAND
DBS Vickers Securities (Thailand) Co Ltd
Contact: Chanpen Sirithanarattanakul
989 Siam Piwat Tower Building,
9th, 14th-15th Floor
Rama 1 Road, Pathumwan,
Bangkok Thailand 10330
Tel. 66 2 857 7831
Fax: 66 2 658 1269
e-mail: [email protected]
Company Regn. No 0105539127012
Securities and Exchange Commission,
Thailand
INDONESIA
PT DBS Vickers Sekuritas (Indonesia)
Contact: Maynard Priajaya Arif
DBS Bank Tower
Ciputra World 1, 32/F
Jl. Prof. Dr. Satrio Kav. 3-5
Jakarta 12940, Indonesia
Tel: 62 21 3003 4900
Fax: 6221 3003 4943
e-mail: [email protected]
Page 33