BUY TP: Rp910 (+18.2%) Timah Strong 2Q18 performance on higher volume Sector Bloomberg Ticker Share Price Performance Metals TINS IJ Last price (Rp) 770 Avg. daily T/O (Rpbn/USDmn) 14.6/1.0 3m 6m 12m Absolute (%) -21.8-32.2-18.1 Relative to JCI (%) -21.4-24.9-19.7 52w High/Low price (Rp) 1,240/750 1,400 1,200 1,000 800 600 400 200 0 Outstanding shrs (mn) 5,033 Mkt. Cap (Rpbn/USDmn) 3,875/262 Estimated free float (%) 12.4 Major shareholders RI 65.0% Dimensional Fund 0.0% JP Morgan 0.0% EPS Consensus Sep-17 Oct-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 TINS Ciptadana Cons. % Diff 2018F 69.0 54.7 26.2 2019F 84.3 63.7 32.3 Christian Saortua +62 21 2557 4800 ext. 739 saortuachristian@ciptadana.com http://www.ciptadana.com 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% 1yr Rel. to JCI (RHS) 1H18 net profit grew 13.6% YoY Timah (TINS) posted revenue of Rp4,377 bn in 1H18, inched up by 1.8% YoY and formed 48.1% of our full-year target. The company reported higher ASP of 4.7% YoY to USD 21,389/ton which led to better gross margin as it rose 80 bps to 15.4% in 1H18 and brings gross profit to Rp675 bn (+7.1%). However, a 39.8% jump in general expenses curbed the operating profit lower by 18.2% YoY to Rp269 bn. Meanwhile, a gain from revaluation of investment properties and a higher other incomes buoyed the net profit to grow by 13.6% YoY to Rp175 bn, forming only 31.6% of our full-year target. On quarterly basis, the company posted a better performance in 2Q18 with revenue up by 15.1% QoQ to Rp 2,342 bn on the back of better refined tin sales volume. Meanwhile gross profit jumps 37.3% QoQ to Rp 284 bn which led to a 114.8% QoQ net profit increase to Rp116 bn in 2Q18 even though ASP slide to USD 21,325/ton (-0.7% QoQ). Improving 2 nd quarter performance as production recovered After having a contraction in 1Q18, TINS production volume recovered in 2Q18. Tin concentrate production jumps 72.2% QoQ to 9,567 ton in 2Q18 as weather become more favorable. This led to a higher refined tin sales volume of 19.6% QoQ to 6,940 ton in 2Q18 (see exhb. 3). Apart from bad weather, change in regulation also played part to the company s poor performance in the early year. However, TINS manage to overcome those obstacles and also rejuvenate their production capacity. We expect the company to be able to catch up the production target in the second half. Furthermore, TINS expanding its business to diversify its tin product. Tin chemical production grew 12.2% YoY to 2,971 ton in 1H18 while tin solder production jumps 59.1% to 627 ton. The company posted a 43% YoY growth of revenue to Rp275 bn from tin chemical in 1H18. Its contribute 6.28% to total revenue in 1H18 and we expect it will grow in the future. Maintain BUY with lower TP of Rp910/sh Despite a better performance in 2Q18, 1H18 results were broadly below our expectations on sluggish 1Q18 numbers. Hence we adjust our 2018-19 financial forecasts to accommodate higher cost and slower asp growth. We keep our ASP target for 2018 but revised it down by 2.9% in 2019 to USD 22,440/ton (see exhb. 4). However we upgrade our refined tin sales volume by 1.3% and 6.7% for 2018 and 2019 to 30,516 ton and 32,327 ton. Our new projections resulted in higher revenue target for 2018-19 by 11.6-14.2% to Rp10.2-11,4 tn, but we slashed the bottom line by 7.1% and 32.6% to Rp514-628 bn for 2018-19F. We still like TINS as it s the second largest tin producer in the world. We maintain our BUY call on TINS as we rollover our DCF valuation base to 2019 and come up with lower target price of Rp910 (Previously Rp1,050/sh). Our target price still offers 18.2% potential upside and represents 13.2-10.8 PER 2018-19 which is below 21.1x of 5- years average historical forward PE. Exhibit 1 : Financial Highlights Year to 31 Dec 2016A 2017A 2018F 2019F 2020F Revenue (Rpbn) 6,968 9,217 10,150 11,416 12,791 Operating profit (Rpbn) 498 731 944 1,136 1,441 Net profit (Rpbn) 252 509 514 628 810 EPS (Rp) 33.8 68.3 69.0 84.3 108.8 EPS growth (%) 148.1 102.0 1.0 22.1 29.1 EV/EBITDA (x) 7.4 9.1 5.6 4.8 3.9 PER (x) 22.8 11.3 11.2 9.1 7.1 PBV (x) 1.0 0.9 0.9 0.9 0.8 Dividend yield (%) 0.5 2.2 4.4 4.5 5.5 ROE (%) 4.5 8.4 8.1 9.4 11.3 Source : TINS, Ciptadana Estimates Please see analyst certification and other important disclosures at the back of this report 2
Exhibit 2: Financial Result (Rp bn) 1H18 1H17 YoY 2Q18 1Q18 QoQ FY18F 1H/18F Revenue 4,377 4,301 1.8% 2,342 2,035 15.1% 9,093 48.1% Cost of sales -3,702-3,671 0.8% -1,951-1,751 11.4% Gross Profit 675 630 7.1% 391 284 37.7% Gross Margin 15.4% 14.6% 0.8% 16.7% 14.0% 2.7% Marketing Expenses -48-45 6.7% -31-17 82.4% G&A Expenses -358-256 39.8% -205-153 34.0% Operating Expenses -406-301 34.9% -236-170 38.8% Operating Profit 269 329-18.2% 155 114 36.0% 1,009 26.7% Operating Margin 6.1% 7.6% -1.5% 6.6% 5.6% 1.0% Interest Income 23 4 475.0% 9 14-35.7% Interest Expenses -126-77 63.6% -69-57 21.1% Other Income (Expenses) 80-18 n/m 65 15 333.3% Total Other Inc.(Exp.) -23-91 -74.7% 5-28 n/m Pre-tax Profit 246 238 3.4% 160 86 86.0% Tax -71-84 -15.5% -40-31 29.0% Profit Before MI 175 154 13.6% 120 55 118.2% Minority Interest 0 0 0.0% 0 0 0.0% Net Profit 175 154 13.6% 120 55 118.2% 553 31.6% Net Margin 4.0% 3.6% 0.4% 5.1% 2.7% 2.4% Exhibit 3: Operational Result Operational 1H18 1H17 YoY 2Q18 1Q18 QoQ Tin concentrate production (Mt) 15,122 16,078-5.9% 9,567 5,555 72.2% Refined tin production (MT) 12,366 14,905-17.0% 7,005 5,361 30.7% Refined tin sales (MT) 12,741 14,404-11.5% 6,940 5,801 19.6% Average selling price (USD/MT) 21,389 20,432 4.7% 21,325 21,470-0.7% Source: TINS Exhibit 4: Change of Assumption Assumption 2018F 2019F Old New Chg Old New Chg ASP (USD/ton) 21,420 21,420.0 0.0% 23,100 22,440.0-2.9% Sales Volume (mn tons) 30,128 30,516 1.3% 30,299 32,327 6.7% Revenue (Rp bn) 9,093 10,150 11.6% 9,998 11,416 14.2% Operating Profit (Rp bn) 1,009 944-6.5% 1,626 1,136-30.2% Operating Margin (%) 11.1 9.3-1.80 16.3 9.9-6.32 Net Profit (Rp bn) 553 514-7.1% 931 628-32.6% Net Margin (%) 6.1 5.1-1.02 9.3 5.5-3.82 Source: Ciptadana Estimates Please see analyst certification and other important disclosures at the back of this report 3
Exhibit 5: Tin Concentrate and Refined Tin Production ton 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - Tin Concentrate Refined Tin 35,740 33,327 31,178 31,460 34,667 32,327 24,121 30,249 30,516 23,756 2016 2017 2018F 2019F 2020F Exhibit 6: ASP (LHS) and Refined Tin Sales (RHS) USD/ton 30,000 27,500 25,000 22,500 20,000 17,500 15,000 12,500 10,000 Refinden Tin Sales ASP ton 40,000 34,667 32,327 35,000 29,914 30,516 26,677 30,000 25,000 23,460 22,440 21,420 20,000 20,200 15,000 18,181 10,000 5,000-2016 2017 2018F 2019F 2020F Exhibit 7: Forward PE Band 5,000 4,000 3,000 2,000 1,000 0 Jan 13 Oct 13 Jul 14 Apr 15 Jan 16 Oct 16 Jul 17 Apr 18-1,000 51.9x 36.5x 21.1x 5.7x -9.7x -2,000 Please see analyst certification and other important disclosures at the back of this report 4
TINS - Result Update - 04 September 2018 Exhibit 8 - Income Statement Year to 31 Dec (Rpbn) 2016A 2017A 2018F 2019F 2020F Revenue 6,968 9,217 10,150 11,416 12,791 COGS -5,873-7,692-8,358-9,373-10,380 Gross profit 1,095 1,526 1,793 2,043 2,411 Oper. expenses -597-795 -849-907 -971 Oper. profit 498 731 944 1,136 1,441 EBITDA 932 885 1,423 1,678 2,143 Interest income 10 25 34 30 27 Interest expense -118-200 -126-126 -126 Other income (exp.) -6 161 0 0 0 Pre-tax profit 384 716 851 1,039 1,342 Income tax -132-207 -337-412 -531 Minority interest 0 0 0 0 0 Net profit 252 509 514 628 810 Exhibit 9 - Balance Sheet Year to 31 Dec (Rpbn) 2016A 2017A 2018F 2019F 2020F Cash & cash equivalent 570 1,359 1,198 1,094 879 Acct, receivables 821 1,478 1,251 1,251 1,297 Inventory 2,309 2,509 2,633 2,568 2,844 Other curr, asset 1,538 1,650 1,684 1,805 1,937 Total current asset 5,238 6,997 6,767 6,718 6,956 Fixed assets - net 2,221 2,462 2,738 3,234 3,541 Other non-curr.asset 2,090 2,417 2,444 2,479 2,540 Total asset 9,549 11,876 11,949 12,431 13,037 ST debt + curr. maturity 1,733 2,192 1,945 1,935 1,925 Acct, payable 661 733 735 824 913 Advances received 0 0 0 0 0 Other curr. liab 667 477 531 558 585 Long term debt 0 1,500 1,500 1,500 1,500 Other non-curr, liab, 834 912 917 921 926 Total liabilities 3,895 5,815 5,628 5,739 5,849 Shareholder equity 5,653 6,061 6,321 6,692 7,188 Minority interest 0 0 0 0 0 Total liab + SHE 9,549 11,876 11,949 12,431 13,037 Exhibit 10 - Per Share Data (Rp) 2016A 2017A 2018F 2019F 2020F EPS 33.8 68.3 69.0 84.3 108.8 BVPS 759.1 813.9 848.7 898.5 965.1 DPS 4.1 16.9 34.2 34.5 42.1 FCF per share 66.2-153.4 44.5 21.1 13.9 Source : TINS, Ciptadana Estimates Please see analyst certification and other important disclosures at the back of this report 5
Exhibit 11 - Cash Flow Year to 31 Dec (Rpbn) 2016A 2017A 2018F 2019F 2020F Net income 252 509 514 628 810 Depreciation 434 154 479 542 702 Chg in working cap. 495-785 104 155-233 Other 221-298 16-95 -105 CF-Oper activities 1,402-420 1,113 1,230 1,174 Capital expenditure -117-399 -749-1,039-1,036 Others -792-324 -33-34 -35 CF-Investing activities -909-722 -782-1,073-1,071 Net change in debt -381 1,959-247 -10-10 Net change in equity 0 0 0 0 0 Dividend payment -31-126 -254-257 -314 Other financing -15 104 5 5 5 CF-Financing activities -427 1,936-497 -262-319 Net cash flow 66 794-166 -105-216 Cash - begin of the year 497 564 1,357 1,192 1,087 Cash - end of the year 564 1,358 1,192 1,087 871 Exhibit 12 - Key Ratios Year to 31 Dec 2016A 2017A 2018F 2019F 2020F Growth Revenue (%) 1.4 32.3 10.1 12.5 12.0 Operating profit (%) 510.8 46.8 29.1 20.4 26.8 Net profit (%) 148.1 102.0 1.0 22.1 29.1 Profitability Ratios Gross margin (%) 15.7 16.6 17.7 17.9 18.9 Operating margin (%) 7.1 7.9 9.3 9.9 11.3 EBITDA margin (%) 13.4 9.6 14.0 14.7 16.8 Net margin (%) 3.6 5.5 5.1 5.5 6.3 ROA (%) 2.6 4.3 4.3 5.0 6.2 ROE (%) 4.5 8.4 8.1 9.4 11.3 Liquidity Ratios Current ratio (x) 1.7 2.1 2.1 2.0 2.0 Quick ratio (x) 1.0 1.3 1.3 1.3 1.2 Cash conversion cycle (days) 144.1 137.0 137.7 115.1 111.6 Activity Ratio Inventory turnover (days) 143.5 119.1 115.0 100.0 100.0 Receivable turnover (days) 33.2 45.5 49.1 40.0 36.3 Payable turnover (days) 32.6 27.6 26.4 24.9 24.8 Solvency Ratio Interest cover (x) 7.9 4.4 11.3 13.3 17.0 Debt to equity ratio (x) 0.3 0.6 0.5 0.5 0.5 Net debt to equity (x) 0.2 0.4 0.4 0.3 0.4 Source : TINS, Ciptadana Estimates Please see analyst certification and other important disclosures at the back of this report 6
HEAD OF RESEARCH ANALYST ANALYST Arief Budiman Erni Marsella Siahaan, CFA Yasmin Soulisa Strategy, Automotive, Heavy Equipment, Banking Property, Plantations Construction, Oil & Gas T +62 21 2557 4800 ext 919 T +62 21 2557 4800 ext 799 T +62 21 2557 4800 ext 819 E siahaanerni@ciptadana.com E soulisayasmin@ciptadana.com E budimanarief@ciptadana.com ECONOMIST ANALYST ANALYST Imanuel Reinaldo Fahressi Fahalmesta Stella Amelinda T +62 21 2557 4800 ext 820 Cement, Toll Road, Poultry Consumer E reinaldoimanuel@ciptadana.com T +62 21 2557 4800 ext 735 T +62 21 2557 4800 ext 740 E fahalmestafahressi@ciptadana.com E amelindastella@ciptadana.com ANALYST ANALYST TECHNICAL ANALYST Christian Saortua Robert Sebastian Trevor Gasman Coal, Metal mining Retail T +62 21 2557 4800 ext 934 T +62 21 2557 4800 ext 739 T +62 21 2557 4800 ext 760 E gasmantrevor@ciptadana.com E saortuachristian@ciptadana.com E sebastianrobert@ciptadana.com RESEARCH ASSISTANT Sumarni T +62 21 2557 4800 ext 920 E sumarni@ciptadana.com EQUITY SALES Co HEAD OF INSTITUTIONAL SALES Dadang Mulyana Plaza ASIA Office Park unit 2 Plaza ASIA Office Park unit 2 Jl. Jend. Sudirman Kav. 59 Jl. Jend. Sudirman Kav. 59 Jakarta - 12190 Jakarta - 12190 T +62 21 2557 4800 ext 838 T +62 21 2557 4800 ext 807 Co HEAD OF INSTITUTIONAL SALES The Fei Ming F +62 21 2557 4900 F +62 21 2557 4900 E mulyanadadang@ciptadana.com E thefeiming@ciptadana.com BRANCH OFFICES JAKARTA - MANGGA DUA JAKARTA - PURI KENCANA SURABAYA Komplek Harco Mangga Dua Perkantoran Puri Niaga III Intiland Tower Surabaya Rukan Blok C No.10 Jl. Puri Kencana Blok M8 No.2E Ground Floor Suite 5 & 6 Jl. Mangga Dua Raya Kembangan Jl. Panglima Sudirman 101-103 Jakarta - 10730 Jakarta - 11610 Surabaya - 60271 T +62 21 600 2850 T +62 21 5830 3450 T +62 31 534 3938 F +62 21 612 1049 F +62 21 5830 3449 F +62 31 534 3886 SEMARANG Gedung Menara Suara Merdeka 6th Floor Unit 02 Jl. Pandanaran No.30 Semarang - 50134 T +62 24 7692 8777 F +62 24 7692 8778 Please see analyst certification and other important disclosures at the back of this report 7
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