Goldman Sachs Asian Coal 18 March 2011

March 18, 2011
ASEAN: Metals & Mining: Coal

Equity Research
Rising costs compound squeeze from lower coal prices; Cautious

Coal prices to correct further on rising supply, weakening demand
Newcastle coal prices have corrected 7% over last 2 months. However, our checks with traders indicate that demand from China and India continues to slow in the seaborne market due to high coal prices, while supply out of Indonesia has been improving recently, consistent with the widening gap between Indonesias sub-bituminous and Newcastle coal prices. Despite the shutdown of 12.4GW nuclear plants in Japan, we believe that coal consumption may slow due to potential demand disruption on shut-down of 7GW coal power plants (5.5GW may take at least 6 months to re-start of which 2GW is almost completely damaged), high utilization rates of coal fired plants (75%-85%), port damages and power outages.
COAL AND OIL (WTI) PRICE ASSUMPTION
2009 73 -43% 62 -38% 25%* 2010 98 34% 80 29% 25% 2011E 110 12% 100 25% 23% 2012E 105 -5% 110 10% 20% Coal price (NEWC, CY) US$/t YoY growth % % WTI oil price YoY growth % Coal as % of oil equiv US$/bbl % %
* 19% based on 5 year long dated oil (CL 60)
ASEAN COAL SECTOR: VALUATION TABLE

Mkt cap US$m 2,728 8,434 6,473 5,927 6,239 5,270 2,045 Liquidity 6-mos US$ m NA 12.0 17.8 10.0 43.2 7.4 10.4 EV/EBITDA (X) 12E 7.0 6.7 8.3 6.6 6.5 7.7 7.4
Price Ticker HRUM.JK ADRO.JK BUMI.JK ITMG.JK BANP.BK PTBA.JK STRL.SI Curr IDR IDR IDR IDR THB IDR S$ 16-Mar 9,100 2,375 3,025 47,250 742 20,600 2.49
P/E (X) 11E 14.6 17.1 15.8 11.9 12.9 13.6 17.4
Rising costs to keep a lid on margins; remain cautious

Fuel costs (~30% of cash production costs) and inflation pressures are accelerating with added pressure of higher strip ratios which may lead to average 12% higher cash costs in 2011E (despite high 2010 base due to one-off demurrage expenses) and may surprise the market on upside. On higher cost estimates, we revise our 2011E-13E net profit by -19% to +1% and 12-m Directors Cut TPs by -21% to +1%. Stocks under our coverage have fallen by average 7% over the last 2 months, but valuations are still above mid-cycles (both on EV/EBITDA and EV/GCI), keeping us cautious.
12E 11E 11.4 9.4 15.5 7.5 13.6 8.6 10.2 7.9 11.6 7.4 12.2 9.0 11.7 10.4
TARGET PRICES AND RATINGS
GS rating Ticker HRUM.JK ADRO.JK BUMI.JK ITMG.JK BANP.BK PTBA.JK STRL.SI
Curr Price
12-mo TP
Potential ups/dwn -5% -14% -24% 6% -2% -10% -20%
Old New 16-Mar Old New Neutral Neutral IDR 9100 8500 8600 Neutral Sell IDR 2375 2600 2050 Sell* Sell* IDR 3025 2500 2300 Neutral Buy IDR 47250 50000 50000 Neutral Neutral THB 742 800 725 Sell Neutral IDR 20600 19000 18600 Neutral Sell S$ 2.49 2.30 2.00
Downgrade Adaro, SAR to Sell; maintain Sell on Bumi (Conv List)

We downgrade Adaro to Sell from Neutral, given our belief that cash production costs may rise by 20% in 2011E posing earnings risk. We also downgrade SAR to Sell from Neutral on earnings reduction and our new 2011E-12E earnings forecasts are 31-37% below Bloomberg consensus. We maintain Conviction Sell on Bumi given its rich valuations, 4th quartile CROCI profile and earnings risks. Our Sell-ideas offer average downside of about 19%.
*This stock is on our regional Conviction List. Note: Our 12-month target prices are based on 2011E Directors Cut methodology. Source: Bloomberg, Goldman Sachs Research estimates.
Raise ITMG to Buy; PTBA to Neutral post recent underperformance

We upgrade ITMG to Buy from Neutral given attractive valuations (2011E EV/EBITDA is at 9% discount to sector average), superior CROCI profile (>60% in 11E-13E) and high dividend yields (6.3% in 2011E). We also upgrade PTBA to Neutral from Sell given the stocks under-performance relative to peers.
Key risks
Disruption in the global coal supply chain causing coal prices to spike.
Nikhil Bhandari +65-6889-2867 nikhil.bhandari@gs.com Goldman Sachs (Singapore) Pte Patrick Tiah, CFA +65-6889-2468 patrick.tiah@gs.com Goldman Sachs (Singapore) Pte Hong Li Tan +65-6889-2866 hongli.tan@gs.com Goldman Sachs (Singapore) Pte
The Goldman Sachs Group, Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification, see the end of the text. Other important disclosures follow the Reg AC certification, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.
The Goldman Sachs Group, Inc.
Global Investment Research
March 18, 2011
Table of contents
Coal prices to correct further on easing demand and rising supply Coal prices down, but further seaborne demand weakening ahead? Japan earthquake: coal consumption may slow near-term Supply has been easing recently; coal remain overvalued vs. oil Thermal coal supply may continue to improve structurally Rising cost inflation; Reduce EPS, TPs; Downgrade Adaro, SAR to Sell; Raise ITMG to Buy, PTBA to Neutral; Remain Sell (CL) on Bumi Rising costs may surprise the market on the upside PT Adaro (ADRO.JK): Costs may overshoot; downgrade to Sell Straits Asia (STRL.SI): Downgrade to Sell; rich valuations, market expectations appear too high Bumi Resources (BUMI.JK) Rich valuations, 4th quartile CROCI; maintain Conviction Sell ITMG (ITMG.JK) Attractive valuations, high CROCI, strong dividend yield; Upgrade to Buy PT Bukit Asam (PTBA.JK) Railway implementation risks largely priced in; upgrade to Neutral from Sell Banpu (BANP.BK): Earnings reduction on Daning divestment; maintain Neutral Harum (HRUM.JK): Maintain Neutral Risks for the sector 3 3 4 4 6 8 8 15 15 16 17 18 20 20 20
Goldman Sachs Global Investment Research
March 18, 2011
Coal prices to correct further on easing demand and rising supply

Coal prices down, but further seaborne demand weakening ahead?
Coal prices have corrected by 7% over last 2 months on easing weather conditions and weakening demand from China and India. However, our checks with coal traders indicate that demand from China and India continue to slow in the seaborne market due to high coal prices. Exhibit 1: Newcastle spot thermal coal prices
(current spot price is US$129/t)
(US$/t) 200 180 160 140 120 100 80 60 40 20 0
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jul-09 Jan-10 Oct-10 Jul-05 Jul-06 Jul-07 Jul-08 Apr-10 Oct-09 Oct-05 Oct-06 Oct-07 Oct-08 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Jan-11 Jul-10
Exhibit 2: Coal and oil (WTI) price assumptions

No change to our coal price assumptions
Coal price (NEWC, CY) US$/t YoY growth % % WTI oil price YoY growth % Coal as % of oil equiv US$/bbl % % 2009 73 -43% 62 -38% 25%* 2010 98 34% 80 29% 25% 2011E 110 12% 100 25% 23% 2012E 105 -5% 110 10% 20%
* 19% based on 5 year long dated oil (CL 60)
Source: Global Coal.
Source: Bloomberg, Global Coal, Goldman Sachs Research estimates.
Recently China has been increasingly active in the export market where some of the thermal coal cargos initially booked for sale to China have been rerouted to international markets like Japan. We think this could be driven by negative arbitrage between South China and Newcastle coal prices (which still persists). We estimate that Newcastle coal prices would need to fall
by further 19% to come at parity with Chinas domestic coal prices.

Exhibit 3: South China and Australia coal prices arbitrage remains negative
US$/t 40 30 20 10 (10) (20) (30) (40) (50) (60)
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Jan-11
Exhibit 4: Newcastle coal price parity with Qinhuangdao coal prices (5,500 kcal, on a landed basis)
Qinhuangdao coal prices Rmb/ton 710 740 770 800 830 860 Break-even Newcastle price US$/ton 96 100 104 108 113 117
Assumptions: US$12/t freight from Australia to China; Rmb50/t domestic coastal freight; 17% VAT in China.
(70)
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Source: Global Coal, CCTD, Goldman Sachs Research estimates.
Source: Global Coal, CCTD, Goldman Sachs Research estimates.
March 18, 2011
Japan earthquake: coal consumption may slow near-term

The emergency shutdown of nuclear power plants in Japan could increase the demand for coal and other alternative power sources (like LNG/natural gas, oil, hydro), in our view. If all the nuclear power capacity currently offline were potentially replaced by thermal coal, this would imply about 36 MT of incremental coal demand (assuming 6,000 kcal GAR energy value, 35% fuel efficiency, 80% utilization rate based on industry standards). However, if we assume that each alternative source of power bears approximately 25% nuclear power disruption in proportion to the current power capacity mix in Japan, we estimate the impact to thermal coal demand would be about 7 MT. On the other hand, as per McCloskey (March 16), there are shutdowns of 7 GW of coal-fired power plants in Japan of which 5.5GW of coal power plants may take at least 6 months
to re-start operations which we estimate implies a potential demand disruption of 15 MT p.a. It is also reported that 2GW (Haramachi plant) of coal fired capacity is almost
completely damaged. This analysis assumes no decline in total power consumption from power outages or slower economic activity post the earthquake. McCloskey also reports that Japans coal
fired plants were operating at base-load (approximately 75% to 85% capacity) prior to the earthquake. According to McCloskey, while there is potential to run plants flat out, this
is only possible for up to one or two months before increasing chances of a critical breakdown. While the demand landscape may improve longer-term if nuclear power plants were to recommence operations much later compared to thermal coal power plants, we believe such magnitude of demand improvement would not be enough to absorb the rising supply out of key exporting nations Indonesia, Australia and South Africa.
Supply has been easing recently; coal remain overvalued vs. oil
Indonesian coal supply has been improving recently, which is consistent with the widening spread between Indonesias sub-bituminous and Newcastle coal prices. Our recent checks with coal companies in Indonesia also indicate that monthly mining rates in Jan/Feb have been very strong compared to 2H2010. Meanwhile shipments out of Newcastle are also trending upwards (Exhibit 6), mainly driven by recent increase in port capacity by 30% (with opening of new coal terminal NCIG in 2H2010). As per McCloskey, NCIG
contributed about 7 MT of coal shipments in 2010 (most of it came in 2H of 2010).
March 18, 2011
Exhibit 5: Discount between Indonesias sub-bituminous coal and Newcastle is widening

-20% -22%
Exhibit 6: Newcastle coal shipments: +10% yoy in 2010

Newcastle quarterly coal shipments (MT)
28 7 MT contributed by new NCIG terminal
26
-24% -26% -28% -30% -32% -34% -36%

16
Discount narrowed on weather disruptions in Indonesia (heavy unseasonal rainfall in 3Q10) Average discount = 30%
24
22
20
Discount widens as Indo coal supply improves

18
-38% -40% 1-Jul-09

14
1-Oct-09
1-Jan-10
1-Apr-10
1-Jul-10
1-Oct-10
1-Jan-11
1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
Source: McCloskey. Goldman Sachs Research.
Source: McCloskey.
Coal production growth in Shanxi has shown a strong recovery post consolidation of mines in this region (2010 production is up 24% yoy). We note that thermal coal inventory at power stations (IPPs) appear comfortable and are at 16 days in Feb 2011 which compares with historical range of 11-20 days. Exhibit 7: Shanxi coal production at historical peaks Exhibit 8: Chinas monthly coal inventories at IPPs
Inventories remain at comfortable levels (16 days in Feb 11)
80.0
Days 30 2005-2010 range 2011
70.0
60.0
25
50.0
20
40.0
15
30.0
20.0
10
10.0
5
0.0
0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: SXCoal, CEIC.
Source: SXCoal, CEIC, Goldman Sachs Research.
Oil prices have outperformed the Newcastle coal prices by 23% over last 2 months, which reverses the previous outperformance of coal over oil. Despite this, coal prices are still overvalued at 24% vs. oil on a heat equivalent basis which compares with historical average of 22%. Even at a US$110/t oil price assumption, and assuming a historical average coal-to-oil ratio of 22%, we estimate implied Newcastle coal prices of US$116/t which is 10% below the current spot coal price of US$129/t.
March 18, 2011
Exhibit 9: Coal price as % of oil (heat equivalent basis)

(Currently 24%, 22% average over 2000-10)
55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% Average = 22%
Exhibit 10: Coal price sensitivity to oil on heat equiv basis assuming historical average coal-to-oil ratio of 22%
Oilprice US$/bbl 80 90 100 110 120 Newcastlecoalprices US$/ton 85 95 106 116 127
Note: Our 2011E coal price forecast of US$110/t is based on 23% average coalto-oil ratio but ratio is declining in 2012E to 20%.
Jan-01
Jul-01
Jan-10
Jul-10
Jan-00
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-11
Jul-00
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Source: Bloomberg, Global Coal.
Source: Goldman Sachs Research estimates.
Thermal coal supply may continue to improve structurally

We continue to believe that a majority of prior year investments/projects are nearing completion in Indonesia (34% capacity expansion by year-end 2010E) and we estimate the capacity utilization to remain low (82% - 84% over 2010-11 vs. 88% in 2008). Some of the capacity expansion projects which are nearing completion include: (a) a 32 MT conveyor belt being built by Bumi Resources which is likely to complete by 4Q11; (b) new load out capacity being built by Straits Asia with a capacity of 5.5 MT (likely commissioning in 1Q11 with a full ramp up by 4Q11). Further, the first phase (30 mn tons capacity) of the much anticipated third-coal terminal in Australia (i.e., NCIG, or Newcastle Coal Infrastructure Group) which has been under construction since 2008 was completed in May 2010. In the past, coal companies tended to overstate their Newcastle port access requirements because there was no penalty for nonfulfillment. As a result, port throughput was not optimal. Under the proposed port access protocol, coal companies must sign a rolling 10-year ship-or-pay contract and show that they have the reserves to match. The new access protocol was previously proposed to be effective 2010; however this has been delayed since then and is now likely to be implemented in 2011. Meanwhile, our global thermal coal supply-demand model continues to indicate that supply deficit in 2010 is likely to narrow in 2011.
March 18, 2011
Exhibit 11: Indonesiacapacity utilization declining
Exhibit 12: Newcastles coal terminal capacity (MT)

(increased 30% in 2H10 on NCIG coal terminal completion)
mn tons 300
Production (LHS)
Capacity (LHS)
Utilization rate (RHS)
95% 90% 85%
250
200 80% 150 75% 100 70% 65% 2003 2004 2005 2006 2007 2008 2009 2010E 2011E
50
170 160 150 140 130 120 110 100 90 80 70 2009 2010E 2011E 2012E
Source: Company data, Goldman Sachs Research estimates.
Source: NCIG, Goldman Sachs Research estimates.
Exhibit 13: Global thermal coal supply-demand balance

(mn tons)
IEA 2003 Production PR of China United States India Indonesia South Africa Australia Others Total Consumption PR of China India Japan Other pacific basin Pacific Basin Europe (IEA) United States South Africa Russia Other Atlantic Basin Atlantic Basin Total consumption Net imports(exports) Stock changes Production growth (%) Consumption growth (%) 1,421.7 852.9 331.8 105.3 237.5 162.8 633.5 3,745.6 2004 1,641.9 888.0 352.4 131.9 241.6 168.9 669.8 4,094.5 2005 1,785.9 903.3 375.5 158.6 243.3 171.9 711.8 4,350.3 2006 1,880.4 933.1 398.7 199.1 243.2 175.7 741.7 4,572.0 2007 1,973.7 920.6 422.6 231.2 246.1 181.9 758.9 4,735.0 2008 2,229.6 935.7 457.9 236.7 250.6 185.3 781.0 5,077.0 2009* 2,432.6 859.0 487.8 264.5 245.7 204.6 777.8 5,272.1 GS estimate 2010E 2,640.3 859.0 526.8 290.4 253.1 219.0 811.1 5,599.7 2011E 2,801.4 883.9 542.6 337.9 263.2 236.5 846.8 5,912.3
1,427.7 336.2 108.7 281.4 2,154.0 290.0 879.3 164.4 99.8 204.5 1,638.0 3,792.0 28.6 (17.9) 8.9% 9.6%
1,661.1 372.9 119.9 303.4 2,457.4 289.9 913.2 177.0 95.8 199.8 1,675.6 4,133.0 24.4 (14.1) 9.3% 9.0%
1,816.5 391.7 120.4 326.3 2,654.8 281.3 932.7 172.4 96.4 207.3 1,690.2 4,345.1 7.9 13.1 6.2% 5.1%
1,965.5 418.7 121.4 349.9 2,855.5 294.9 920.4 175.1 101.1 217.7 1,709.2 4,564.7 25.3 32.6 5.1% 5.1%
2,073.2 454.1 128.8 374.9 3,030.9 297.6 934.6 181.0 95.5 222.6 1,731.3 4,762.2 30.6 3.4 3.6% 4.3%
2,295.7 498.8 126.8 388.1 3,309.4 273.1 931.3 179.7 106.6 212.1 1,702.8 5,012.1 31.4 96.3 7.2% 5.2%
2,640.0 536.3 112.5 399.0 3,687.8 248.3 842.2 179.4 89.8 203.3 1,563.0 5,250.8 28.7 50.0 3.8% 4.8%
2,852.8 597.4 119.6 431.0 4,000.7 253.9 877.6 183.1 101.0 213.5 1,629.0 5,629.7 (30.0) 6.2% 7.2%
3,063.3 654.2 114.9 448.2 4,280.6 259.6 876.5 187.8 105.9 215.6 1,645.4 5,926.0 (13.7) 5.6% 5.3%
* Estimates of IEA. Source: IEA, Goldman Sachs Research estimates.
March 18, 2011
Rising cost inflation; Reduce EPS, TPs; Downgrade Adaro, SAR to Sell; Raise ITMG to Buy, PTBA to Neutral; Remain Sell (CL) on Bumi
Rising costs may surprise the market on the upside
Fuel costs (~30% of cash production costs) and inflation pressures are accelerating with added pressure of higher strip ratios which may lead to average 12% higher cash costs in
2011E (despite high 2010 base due to one off demurrage expenses given high rainfall)
and may surprise the market on upside. While margins are set to rise in 2011E as higher ASP offsets higher costs, consensus margin expectations appear too high, in our view. Exhibit 14: Cash production costs break-down Exhibit 15: Key drivers of cash costs
Breakdown of cash costs into fuel and non-fuel costs
Driven by oil prices
Transportat ion / others 30%
Overburden removal 45%
Fuel cost, 30%
Non-fuel cost, 70%
Extraction & processing 25%
Driven by inflation, strip ratios
Exhibit 16: Rising cash costs due to higher fuel prices...

ASEAN coal stocks cash costs versus oil prices
US$/t 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 2007 2008 2009 2010 2011E Cash production costs Oil price increase yoy 20.0 0.0 80.0 US$/bbl 120.0 100.0
Exhibit 17: ...and inflation...

ASEAN coal stocks cash costs versus Indonesia inflation
US$/t 50.0 45.0 40.0 35.0 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 15.0 10.0 2007 2008 2009 2010 2011E 1% 0%
60.0 40.0
30.0 25.0 20.0
Cash production costs
Indonesia's Infation yoy (RHS)
Source: Bloomberg, Goldman Sachs Research estimates.
Source: Goldman Sachs Global ECS Research, Goldman Sachs Research estimates.
March 18, 2011
Exhibit 18: ...which may keep a lid on margins

Consensus margin expectations appear too high
US$/t 38 36 34 32 30 28 26 24 22 20 18 16 2008 2009 2010 2011E GS 2012E Bloomberg consensus
ASEAN Coal Sector EBITDA/t
Reducing earnings estimates on higher cost assumptions

We are adjusting our 2011E-13E net profit forecasts by -19% to +1% to factor in higher costs, mainly driven by higher inflation in Indonesia and higher strip ratios for some companies. Some company specifics:
Adaro: We are lowering our 2011E-13E net profit forecasts by 18%-19% as we raise the
strip ratio for its Tutupan coal mine (constitutes 91% of total 2011E production) from 5.5X to 6.4X.
SAR: We are lowering the 2011E-13E net profit forecasts by 10%-17% to factor in
higher strip ratio for its Jembayan mine (constitutes 88% of 2011E production) to11.3X (prior 10.0X).
Banpu: We are lowering the 2011E-13E net profit forecasts by 13-15% to factor in the
recent divestment of Daning coal mine in China.
Post the earnings revision, our 2011E-13E net profit forecasts are 2%-37% below Bloomberg consensus. We are also adjusting 2010E net profit forecasts for Bumi and Adaro by 6% each as we factor in the higher demurrage expenses due to heavy rainfall in 2H2010.
Exhibit 19: ASEAN coal sector net income revision

Curr Indonesia Harum Energy Bumi Resources PT Adaro Energy PT Bukit Asam ITMG Thailand Banpu Singapore Straits Asia Rp bn US$ mn Rp bn Rp bn US$ mn Bt mn US$ mn FY2010E 861 275 2661 NA NA NA NA GS forecasts FY2011E FY2012E 1528 431 4628 3485 497 15684 114 1952 500 5115 4044 580 17325 170 FY2013E 2026 502 4841 4017 589 19449 192 % change FY2010E FY2011E FY2012E FY2013E 0% -6% -6% NA NA NA NA 1% -10% -18% -5% 0% -13% -16% -4% -9% -19% -7% 0% -14% -17% -4% -6% -18% -8% 0% -15% -10% vs. consensus FY2011E FY2012E -2% -18% -13% -3% -7% -13% -31% -14% -26% -28% -4% -8% -14% -37%
March 18, 2011
Exhibit 20: ASEAN coal sector: Earnings sensitivity to coal prices

Impact of 5% increase in Newcastle benchmark price
Net Profit 2012E +10% +21% +11% +13% +12% +22% +12% EBITDA 2011E +3% +5% +1% +4% +5% +8% +3% 2012E +8% +15% +11% +12% +11% +17% +11%
Adaro Bumi Resources Bukit Asam ITMG Banpu Straits Asia Resources Harum Energy
2011E +5% +8% +1% +5% +5% +11% +3%
Directors Cut remains our primary valuation methodology

We continue to use our returns-based Directors Cut as our primary methodology to set our 12-month target prices. We identify a high correlation between EV/GCI and CROCI/WACC for the Indonesian thermal coal sector, as investors tend to reward companies earning higher returns with a premium ratingi.e., businesses that generate a substantial spread in terms of returns (CROCI) over their cost of capital tend to trade at a substantial premium to the capital invested in that business (GCI). The Directors Cut methodology considers how the market values the cash invested in a business (EV/GCI) relative to the returns (value) created by the company from those assets (CROCI/WACC). This implies that the market expects stocks above the regression line to see accelerated returns relative to the sector or else are overvalued relative to their cash returns and as such may represent good potential selling opportunities and vice-versa. The underlying assumption in the Directors Cut basic framework is that a companys ratio will converge with the sector average over the long term as under/overvaluations are arbitraged away.
Adjusting TPs on earnings revisions

With the earnings revision, we reduce our 12-month target prices by -21% to +1%. There is no change to our sector average Directors Cut valuation ratio (valratio) of 1.05X which is used in our target price calculations. For Harum, we apply a valuation ratio of 1.16X (10% premium) due to its 1st quartile CROCI.
10
March 18, 2011
Exhibit 21: Coal sector: 2011E Directors Cut plot

16.0 14.0 12.0 10.0 8.0 6.0 4.0
Bumi - Sell (CL) Adaro - Sell ITMG - Buy PTBA
Exhibit 22: Coal sector: 2012E Directors Cut plot

R = 0.9891 Harum
14.0
2011E
2012E
12.0
R = 0.981
Harum 10.0
EV/GCI (x)
EV/GCI (x)
8.0 PTBA 6.0 Bumi - Sell (CL) Adaro - Sell Banpu SAR - Sell 0.0 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 ITMG - Buy
4.0
2.0 2.0 0.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7 .0 8.0 9.0 10.0 11.0 12.0 13.0 CROCI/WACC (x)
Banpu
SAR - Sell
CROCI/WACC (x)
EV/EBITDA, EV/GCI Valuations are above mid-cycles

ASEAN coal stocks have fallen by average 7% over the last 2 months, but valuations are still above mid-cycle levels. For instance, stocks are trading at nearly 1 SD above mean on both 12-m forward EV/EBITDA and EV/GCI (Gross Cash Invested). Exhibit 23: ASEAN coal: 12-mo forward EV/EBITDA
trading at more than 0.5 SD above mean
16.00 14.00 12.00 10.00 4.0 8.00 3.0 6.00 4.00 2.00 0.00
Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11
Exhibit 24: ASEAN coal: 12-mo forward EV/GCI

trading at more than 1 SD above mean
7.0 ASEAN coal sector - 12 mo fwd EV/GCI
ASEAN coal sector - 12 mo fwd EV/EBITDA
6.0
5.0
2.0
1.0
0.0
Sector EV/EBITDA
Average
+1SD
-1SD
Source: DataStream, Company data, Goldman Sachs Research.
Source: DataStream, Company data, Goldman Sachs Research.
Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11
Sector EV/GCI ratio Average +1SD -1SD
11
March 18, 2011
Exhibit 25: Valuation sensitivity to various coal price assumptions

Even at 2011 coal prices of US$130/t valuations are only near mid-cycle levels
Share price Curr 16-Mar Indonesia PT Harum Energy Bumi Resources PT Adaro Energy PT Bukit Asam ITMG Banpu Straits Asia Rp Rp Rp Rp Rp Bt S$ 9,100 3,025 2,375 20,600 47,250 742 2.49 2011E P/E Coal price = US$120/t 13.3 13.8 15.1 13.3 11.0 11.8 14.6 2011E EV/EBITDA Coal price Coal price Coal price = US$110/t = US$120/t = US$130/t 9.2 8.6 7.3 9.0 7.9 7.4 10.4 8.6 7.9 6.8 8.8 7.3 7.0 9.1 8.1 7.2 6.4 8.5 6.8 6.5 8.1
Coal price = US$110/t 14.1 15.8 16.4 13.6 11.9 12.9 17.4
Coal price = US$130/t 12.6 12.3 14.0 13.0 10.1 11.0 12.6
Mid-cycle P/E NA 12X 13X 12X 9X 12X 13X
Mid-cycle EV/EBITDA NA 7X 6X 8X 6X NA 7X
Exhibit 26: Target price derivation using Directors Cut

Assuming stocks converge to average DC ratio
Curr Share price 16-Mar 9,100 2,375 3,025 20,600 47,250 742 2.49 Rating EV/GCI CY11E 14.1 2.2 1.8 7.9 5.4 2.0 2.2 CROCI/ WACC CY11E 12.3 1.8 1.4 7.0 5.7 1.9 1.7 Sector avg DC X 1.05 1.05 1.05 1.05 1.05 1.05 1.05 Prem/ disc % 10% 0% 0% 0% 0% 0% 0% TP DC ratio X 1.16 1.05 1.05 1.05 1.05 1.05 1.05 12-mo TP Upside/ (downside) % -5% -14% -24% -10% 6% -2% -20%
Harum Energy PT Adaro Energy Bumi Resources PT Bukit Asam ITMG Banpu Straits Asia
Rp Rp Rp Rp Rp Bt S$
Neutral Sell Sell* Neutral Buy Neutral Sell
8,600 2,050 2,300 18,600 50,000 725 2.00
Exhibit 27: ASEAN coal sector CROCI trend

CROCI Harum Energy Adaro Bumi Resources PTBA Straits Asia Banpu ITMG CROCI quartiling Harum Energy Adaro Bumi Resources PTBA Straits Asia Banpu ITMG 2007 NA 23% 18% 38% 10% 15% 29% 2007 NA 2 3 1 4 4 2 2008 78% 19% 19% 84% 26% 22% 55% 2008 2 4 4 1 3 3 2 2009 168% 26% 15% 106% 25% 24% 64% 2009E 1 3 4 2 3 4 2 2010E 109% 18% 15% 60% 14% 11% 52% 2010E 1 3 3 2 4 4 2 2011E 137% 20% 16% 78% 16% 18% 66% 2011E 1 3 4 2 4 3 2 2012E 149% 20% 15% 73% 20% 19% 62% 2012E 1 3 4 2 3 4 2
12
March 18, 2011
Target price implied 2011E EV/EBITDA multiples are near mid-cycle

We cross-check our Directors Cut derived 12-month target prices against historical EV/EBITDA multiples. Given the variability in non-cash items, especially amortization of goodwill and deferred exploration and development costs, we prefer EV/EBITDA over P/E analysis. While, in our view, spot coal prices likely bottomed in 2009, we believe earnings will react with a lag, as Indonesian coal producers largely contract selling prices on a one-year forward basis. Hence we see 2010 as the trough earnings year, while earnings are likely to grow significantly in 2011 from rising coal prices. As such, we believe that up-cycle 2010 EV/EBITDA multiples, and near mid-cycle 2011 EV/EBITDA multiples are appropriate.
Exhibit 28: ASEAN coal sector: Ratings and 12-month target price changes
Assuming stocks converge to average DC ratio
Share price Curr 16-Mar Indonesia PT Harum Energy Bumi Resources PT Adaro Energy PT Bukit Asam ITMG Thailand Banpu Singapore Straits Asia Rp Rp Rp Rp Rp Bt S$ 9,100 3,025 2,375 20,600 47,250 742 2.49 Rating Old Neutral Sell* Neutral Sell Neutral Neutral Neutral New Neutral Sell* Sell Neutral Buy Neutral Sell 12 month target price potential % upside/ TP Old New change downside methodology 8,500 2,500 2,600 19,000 50,000 800 2.30 8,600 2,300 2,050 18,600 50,000 725 2.00 1% -8% -21% -2% 0% -9% -13% -5% -24% -14% -10% 6% -2% -20% Director's Cut Director's Cut Director's Cut Director's Cut Director's Cut Director's Cut Director's Cut TP implied EV/EBITDA CY11E 8.9X 7.3X 6.6X 8.0X 8.3X 7.3X 8.5X 12-mo forward EV/EBITDA Avg NA 7X 6X 8X 6X NA 8X TP implied P/E 12-mo forward P/E Avg NA 10X 14X 12X 9X 12X 14X
CY12E Range 6.5X 7.0X 5.8X 6.8X 7.0X 6.4X 6.1X NA 3-23X 2-8X 2-11X 1-9X NA 2-15X
CY11E CY12E Range 13.8X 12.0X 14.7X 12.3X 12.6X 12.6X 14.0X 10.8X 10.4X 13.3X 11.0X 10.8X 11.4X 9.4X NA 2-30X 3-18X 4-18X 2-15X 3-16X 3-26X
*denotes stock is on Conviction list. Source: Bloomberg, Goldman Sachs Research estimates.
13
March 18, 2011
Goldman Sachs Global Investment Research 14
Exhibit 29: Thermal coal sector valuation

Average daily trading Market volume Price cap (US$ mn) EPS growth (%) 16-Mar (US$mn) 6-mos 2010E 2011E 2012E 9,100 3,025 2,375 20,600 47,250 742 2.49 2,728 6,473 8,434 5,270 5,927 6,239 2,045 34,387 NA 17.8 12.0 7.4 10.0 43.2 10.4 7% -15% -39% -26% -11% -3% -39% -18% 76% 49% 68% 72% 75% 36% 37% 59% 27% 16% 10% 12% 17% 10% 49% 20%
SEDOL1 Indonesia PT Harum Energy Bumi Resources Adaro Energy Bukit Asam PT Indo Tambangraya Thailand Banpu PCL Singapore Straits Asia Resources ASEAN (AVERAGE)
Ticker HRUM.JK BUMI.JK ADRO.JK PTBA.JK ITMG.JK BANPU.JK STRL.SI
GS rating Neutral Sell * Sell Neutral Buy Neutral Sell
Curr IDR IDR IDR IDR IDR THB S$
P/E (X) 2010E 2011E 2012E 25.6 23.6 28.7 23.3 20.9 17.5 23.8 23.3 14.6 15.8 17.1 13.6 11.9 12.9 17.4 14.7 11.4 13.6 15.5 12.2 10.2 11.6 11.7 12.3
EV/EBITDA (x) 2010E 2011E 2012E 16.2 11.3 10.6 17.7 13.3 15.7 12.3 13.9 9.4 8.6 7.5 9.0 7.9 7.4 10.4 8.6 7.0 8.3 6.7 7.7 6.6 6.5 7.4 7.2
P/B (x) 2011E 7.9 2.9 3.4 5.5 7.0 2.3 3.4 4.6
ROE % 2011E 54% 18% 30% 41% 59% 18% 20% 34%
Div EV / EV / yield (%) reserves resources 2011E (US$/ton) (US$/ton) 2.1% 1.9% 1.5% 2.7% 6.3% 1.5% 2.8% 2.7% 23.7 5.0 9.6 2.4 18.9 14.1 17.8 13.1 6.3 1.9 3.5 0.7 3.4 3.2 1.6 2.9
China Yanzhou Coal Mining 1171.HK China Shenhua Energy 1088.HK China Coal Energy Co 1898.HK Australia BHP Billiton Rio Tinto MacArthur US Arch Coal Consol Peabody GLOBAL AVERAGE
Buy Buy Sell
HKD HKD HKD
24.45 34.00 11.48
15,151 85,904 19,332
46.7 80.4 45.7
104% 22% 24%
41% 29% 11%
25% 13% 19%
11.5 14.2 12.8
8.0 10.6 11.1
6.0 8.8 8.7
8.6 8.2 7.4
5.9 5.7 6.3
4.2 4.6 4.8
2.3 2.5 1.6
30% 23% 14%
3.7% 3.1% 2.3%
6.9 10.3 4.7
NA NA NA
BLT.L RIO.L MCC.AX
CS CS Buy
GBP (p) GBP (p) AU$
2,223 3,882 10.95
220,959 127,832 2,526
29,483 34,990 17.7
41% 113% 51%
26% 17% 40%
4% -16% -12%
11.6 9.6 11.7
9.2 8.2 8.3
8.8 9.7 9.5
7.1 5.5 5.6
5.7 4.7 3.9
5.4 5.2 4.3
2.7 1.8 1.8
28% 20% 30%
2.8% 2.4% 6.0%
NA NA 18.9
NA NA NA
ACI CNX BTU
Sell Sell Buy
US$ US$ US$
33.67 51.50 65.13
5,487 11,747 17,468
148.7 180.9 269.3
NM -23% 67% 42%
NM 7% 79% 34%
NM 18% 17% 10%
34.0 22.6 21.4 17.3
13.4 21.1 12.0 11.7
12.8 17.9 10.3 10.5
10.6 10.6 10.6 8.8
6.4 9.4 6.9 6.3
5.7 8.6 5.7 5.6
2.1 3.4 2.9 2.6
16% 16% 24% 24%
1.2% 0.5% 0.4% 2.5%
2.0 3.3 2.4 7.7
NA NA NA
Note: Using Adjusted EBITDA for Bumi and Banpu (including associates income)
Note: Based on calendar-year financials. *Denotes this stock is on our Asia Pacific Conviction List. CS = Coverage Suspended. Coverage Suspended stocks are based on Bloomberg estimates. For important disclosures, please go to http://www.gs.com/research/hedge.html Source: Bloomberg, Bloomberg estimates, Goldman Sachs Research estimates.
PT Adaro (ADRO.JK): Costs may overshoot; downgrade to Sell

Costs may overshoot, reduce earnings; downgrade to Sell We estimate a 20%
increase in cash production cost for Adaro in 2011E (highest in ASEAN coal sector) driven by high fuel prices, rising inflation and higher strip ratio for Tutupan coal mine (6.4X vs. prior 5.5X). As such, we reduce our earnings estimates for 2011E/12E/13E by 18%/19%/18% and downgrade the stock to Sell from Neutral. Our 2011E-12E EPS estimates are 13%-28% below Bloomberg consensus.
Production growth from Tutupan mine may slow Adaros Tutupan coal mine is the largest single-pit mine in the Southern Hemisphere producing 42 MT in 2010. Going forward, volume growth from Tutupan may slow due to its huge size and given it is operating in a single pit. Most of the volume growth will come from Wara coal, which is of lower energy value and only started production last year. While the % margins from Wara coal may remain high given lower costs offset lower energy value, $/ton margins may be relatively lower compared to Tutupan coal. Coking coal expansion could be a long-term positive, but no visibility/ guidance
During 1Q10, Adaro entered into a JV with BHP to acquire 25% stake in the Maruwai greenfield coking coal project. While this may enhance CROCI in the long-term, however, for the time being, we believe the project lacks financial disclosures and visibility on infrastructure developments. We cut our 12-month 2011E Directors Cut-based target price to Rp2,050 (implying 14% downside potential) from Rp2,600 on the back of earnings reduction.
Key risks Higher than expected coal or oil prices.
Exhibit 30: Adaros 12-month forward P/E chart

Price (Rp) 3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 20X 16X
Exhibit 31: Adaros 12-mo forward EV/EBITDA chart

Price (Rp) 3,500 3,000 2,500 12X 2,000 1,500 8X 4X 1,000 500 0 5.0X 3.0X 2.0X 9.0X
7.0X
Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11
Source: Company data, DataStream, Goldman Sachs Research.
Straits Asia (STRL.SI): Downgrade to Sell; rich valuations, market expectations appear too high
Reduce earnings; downgrade to Sell - We reduce our 2011E-13E net profit estimates by 16%-17% on high costs, driven by stronger inflation and higher strip ratio for Jembayan mine (11.3X vs. prior 10X). With lower earnings, SAR screens as one of the most expensive stock globally on EV/EBITDA and overvalued versus cash returns. We downgrade the stock to Sell from Neutral.
Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11
March 18, 2011
Market expectations appear too high Our 2011E-2012E net profit estimates are 31%37% below Bloomberg consensus driven by lower ASPs (which is in line with company guidance) and higher costs. Even if we assume a higher ASP of $90 (guidance is $80-85), our analysis implies consensus downside risk to EBITDA of 7%. New load-out to commission soon, but ramp up may take time SAR is using
temporary measures to load part of its coal (post collapse of its loader in 2009), which are more expensive and less efficient. The new loader in Jembayan is expected to commission soon but the ramp up to full capacity may take time (expected 4Q11). As a result, the costs in 2011 may continue to remain high as large part of volumes may be supported by temporary loading facilities.
High production profile may further disappoint While the volumes out-performed in 2010 for Jembayan mine, 2011 may take a breather as the existing loader is running at very high utilization and may need to undergo some maintenance this year. The higher margin (i.e. lower cost and higher calorific value) rezoned Sebuku mine may continue to see production delays as approvals are pending.
We cut our 12-month 2011E Directors Cut-based target price to S$2.00 (implying 20% downside potential) from S$2.30.
Key risks - higher-than- expected production, sharp coal price rally.

Exhibit 32: SARs EBITDA sensitivity to ASPs (2011E)
Even at higher ASP assumptions, earnings risk remains
Scenario I Downside case 80.0 52.5 6.2 4.7 16.6 11.3 188 -40% Scenario II Base case 83.2 52.5 6.4 4.7 19.6 11.3 222 -30% Scenario III Upside case 85.0 52.5 6.6 4.7 21.2 11.3 240 -24% Scenario IV Upside case 90.0 52.5 7.0 4.7 25.8 11.3 292 -7% Company guidance 80-85 52-53
Exhibit 33: Consensus vs. GS forecasts for 2011E net profit (US$ mn)
220
ASP Cash costs* Royalties SG&A EBITDA
US$/t US$/t US$/t US$/t US$/t
200
180
Production MT EBITDA US$m vs. consensus % * excl royalties
11.0-11.5
160
140
120 New GS 2011E NP forecasts 100 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11
2011 Bloomberg NP consensus GS 2011E NP historical forecasts
Bumi Resources (BUMI.JK) Rich valuations, 4th quartile CROCI; maintain Conviction Sell
Valuations are rich - Bumi has out-performed the JCI index and coal peers over last 6 months (driven by recent fund raising which eased liquidity risks, London listed Vallar buying stake in Bumi and listing of non-coal arm BRM). Valuations are rich relative to CROCI on our Directors Cut framework and on P/E (trading at more than 1 SD above midcycles). We maintain our Sell rating (Conviction List) on the stock. Low CROCI profile (4th quartile) While Bumis core coal mining assets (KPC and Arutmin) are still generating strong returns, the most of the companys non-coal investments (except NNT) are currently not generating returns (some in exploratory stage). In addition, capital discipline has also been poor with a constant rise in deferred stripping expenditure (capitalized US$177 mn in 9M2010 now at US$420 mn). Bumi wrote off US$275 mn of deferred stripping expense in 2009.
March 18, 2011
Vallar deal: No change in management control In November 2010, Vallar Plc

announced that it had acquired a 25% stake in Bumi through a share swap deal with the Bakrie family. Post the transaction, Bumis stock is up 19% vs. the JCI down 4%. We note that there is no cash offer or change in management control for Bumi.
Market expectations are high - Our 11E-12E EPS is 18%/26% below consensus. This is
mainly because of higher costs and we believe market has not fully priced in the lower earnings from associate NNT gold and copper mine (30% of 2010E PBT) as the mine cut back production for expansion and uses a lower grade ore for the next 2 years. We cut our 12-m Directors Cut-based TP to Rp2,300 (24% downside potential) from Rp2,500 previously as we reduce our 2010E - 2013E net profit estimates by 9%-10% on higher cost assumptions.
Key risks - 1) High beta stock may out-perform if coal/oil prices spike sharply, 2) Some of Bumis recent investments (e.g. Oil & Gas, Lead & Zinc) are in exploration stage and we have not factored in potential earnings contribution, 3) If Bumi refinance CIC loan (19% IRR) at a lower interest cost, it may boost earnings.
Exhibit 34: Bumi s CROCI profile (4th quartile)
CROCI Harum Energy Adaro Bumi Resources PTBA Straits Asia Banpu ITMG CROCI quartiling Harum Energy Adaro Bumi Resources PTBA Straits Asia Banpu ITMG 2007 NA 23% 18% 38% 10% 7% 29% 2007 NA 2 3 1 4 4 2 2008 78% 19% 19% 84% 26% 15% 55% 2008 2 4 3 1 3 4 2 2009 168% 26% 15% 106% 25% 16% 64% 2009E 1 3 4 2 3 4 2 2010E 109% 18% 15% 60% 14% 11% 52% 2010E 1 3 3 2 4 4 2 2011E 137% 20% 16% 78% 16% 18% 66% 2011E 1 3 4 2 4 3 2 2012E 149% 20% 15% 73% 20% 19% 62% 2012E 1 3 4 2 3 4 2
Exhibit 35: Bumi s 12-mo forward P/E chart

PE (X) 28 24 20 16 12
Average = 9.7X +1 SD = 14.7X
8
-1 SD= 4.7X
4 0
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jan-11 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
ITMG (ITMG.JK) Attractive valuations, high CROCI, strong dividend yield; Upgrade to Buy
Attractive valuations; raise to Buy - ITMG has underperformed the JCI market and coal
peers by 7%/8% over last 3 months and the stock is now trading at a 2011E/12E EV/EBITDA of 7.5X/6.7X which is at low end of the sector (9%/8% discount to ASEAN coal sector average). The underperformance was largely driven by weaker than expected FY10 results which we think was largely due to one-offs (hedging loss, higher strip ratio which is likely to normalize in 2011E). We think the correction is overdone and upgrade the stock to Buy from Neutral.
High quality coal producer; strong CROCI profile ITMGs average coal calorific value
(CV) is the highest among Indonesian coal producers (5850 kcal vs. sector average of 5500) which we believe results in superior cash returns (66% in 2011E).
Concerns on short reserves life unjustified in our view We think the market is concerned about ITMGs reserves life which is at low end of sector at 15 years. However, we note that reserves to resources ratio is only 20% (peers are 30%-40%) indicating strong potential to upgrade reserves in future (recently ITMG raised its reserves by 14%). Meanwhile the concession only lasts 10 years which is lower than the reserves life.
March 18, 2011
High dividend yields ITMGs dividend yield of 6.3% in 2011E is the highest in the ASEAN
coal sector. While there is no fixed dividend policy, we note that dividend payout ratio has been increasing from 60% in 2007 to 70% in 2009 and 75% in 1H10. ITMG has a net cash position (US$295 mn in 2010) and generates strong FCF (US$288 mn in 2011E). Given Banpus (parent company; holds 65% stake in ITMG) high gearing levels (post Centennial Coal acquisition), we think there could be further upside risk to ITMGs dividend payout ratio. We maintain our 12-month 2011E Directors Cut-based target price at Rp50,000, implying 6% upside potential, the highest under our cautious sector stance.
Key risks - Sharp fall in coal or oil prices, a production shortfall.

Exhibit 36: Coal calorific value comparison (kcal, GAR)
6000 5800 5600 5400 5200 5000 4800 Adaro PTBA Bumi SAR Harum ITMG
Exhibit 37: ASEAN coal sector 2011E Dividend yields

8% 7% 6% 5% 4% 3% 2% 1% 0% Adaro Banpu Bumi Harum SAR PTBA ITMG
PT Bukit Asam (PTBA.JK) Railway implementation risks largely priced in; upgrade to Neutral from Sell
Stock has underperformed our coverage universe, upgrade to Neutral from Sell Since we added PTBA to our Sell List on Oct 22, 2010, the stock has risen by 2.5% (vs. the JSE down 1.8%) but has underperformed our coverage universe by 3.7% over the same time period. Over the last 12 months, the stock rose 30.4% (vs. JSE up 32.3%). We thus raise the stock to Neutral from Sell. We believe the stocks outperformance relative to JCI index was driven by a 30% rise in spot coal prices over the same time period. Railway implementation risks remains, but largely priced in PTBAs ongoing railway
project was first initiated in 2007 and after several years of delay is now likely to complete by end-2014. No land has been acquired as yet and the company needs to acquire at least 50% of the required land (~300 km) before starting its targeted construction in 3Q2011. Recently Adani also announced building of another railway from PTBAs mine which is also targeting completion in 2014 but the project is only in its feasibility phase. However, given the stocks recent underperformance, we think this is largely priced in by the market. We cut our 12-month 2011E Directors Cut-based target price to Rp18,600 (10% downside potential) from Rp19,000 previously as we reduce our 2011E-2013E net profit estimates by 5%-8% on higher cost assumptions.
Risks Upside: 1) Higher than expected coal prices, 2) Potentially accretive M&A - With
strong net cash position, PTBA has been on a look-out for M&As and bidding for Indo coal assets, 3) Sooner than expected unlocking of infrastructure bottlenecks. Downside: Production shortfall.
March 18, 2011
Exhibit 38: PTBA 12-mo forward P/E chart

Price (Rp) 24,000 20,000 16,000 12,000 8,000 4,000 0
Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10
Exhibit 39: PTBA 12-mo forward EV/EBITDA chart

Price (Rp)
18X 15X 12X
24,000 20,000 16,000
11.0X 9.0X
6.0X
8X
12,000 4.0X 8,000 2.0X 4,000 0

Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11
Price currency Price as of 03/16/11 Price performance since 10/22/10 3 month price performance 6 month price performance 12 month price performance Rp Rmb HK$ Rmb HK$ Rmb HK$ Bt Rmb HK$ Rs Rp HK$ HK$ $ NT$ W Rs Rs W Rmb HK$ Rs Rs W Rmb HK$ Rs W $ Rp Rp Rs Rs Rs S$ Rmb Rs Rmb 20,600.00 11.48 7.50 8.24 10.64 35.97 41.50 742.00 7.45 11.24 447.35 3,025.00 6.65 23.65 23.30 34.40 34,000.00 203.10 130.85 133,000.00 40.24 23.50 664.10 905.25 361,000.00 3.86 4.18 107.65 482,000.00 106.42 2,375.00 47,250.00 263.25 156.85 159.45 2.49 24.71 599.45 5.05 3,531 2.5% -6.8% -4.5% -12.0% -17.1% 36.8% 23.0% -5.1% 3.0% -8.5% -16.0% 28.7% 10.8% 18.8% 16.2% 11.3% 25.7% -4.2% 6.1% 19.3% -9.2% 6.8% -5.8% -27.8% 23.2% 0.8% -10.1% 7.4% -1.1% -1.2% 5.6% -4.5% -23.2% -28.4% -5.2% 9.2% 3.6% -2.9% -1.0% -1.8% 0.7% 12.1% 8.2% 2.4% -8.3% 20.7% 15.8% -7.5% 12.7% 6.0% -0.7% 7.1% -0.4% 32.3% 8.2% 7.0% 8.8% -9.3% 7.3% 14.7% 1.0% -1.5% -1.0% -22.3% 18.9% 9.3% 2.2% 15.7% 2.6% 4.1% -5.9% -5.1% -10.6% -16.6% -7.4% 1.6% 4.8% -9.0% 11.5% -1.1% 9.0% 17.5% 12.4% -0.6% -17.5% 64.3% 26.9% 15.6% 14.8% 7.0% 13.0% 66.2% 30.6% 43.0% 15.0% 7.3% 34.7% 9.1% 22.7% 19.3% 28.4% 31.3% -5.0% -24.4% 32.5% 9.3% -9.5% 5.9% -5.9% -6.0% 13.1% 22.4% -18.2% -22.3% -6.0% 9.7% 23.1% 0.7% 10.7% 5.7% 30.4% -5.7% -4.3% -30.8% -25.8% 76.4% 70.6% 22.0% -9.0% 47.3% 30.3% 21.0% 8.0% 67.3% 17.1% 8.0% 47.8% 19.8% 3.4% 50.6% 18.2% 42.3% -4.4% -24.5% 87.5% -9.0% -9.7% 8.4% -11.6% -12.4% 27.0% 38.4% -40.1% -33.6% -23.3% 19.7% 55.5% -4.4% -23.5% 32.3%
3X
Exhibit 40: PTBA's share price performance versus peer group

Prices as of 16 March, 2011
Company Ticker Primary analyst
Asia Pacific Metals & Mining Peer Group PT Tambang Batubara Bukit Asam Aluminum Corporation of China (A) Aluminum Corporation of China (H) Angang Steel (A) Angang Steel (H) Anhui Conch Cement (A) Anhui Conch Cement (H) Banpu Public Company Baoshan Iron & Steel BBMG Corporation Bhushan Steel Bumi Resources China Molybdenum Co. China National Building Material China Steel (GDR) China Steel Corporation Dongkuk Steel Mill Hindalco Industries Hindustan Zinc Hyundai Steel Jiangxi Copper (A) Jiangxi Copper (H) Jindal Steel & Power JSW Steel Korea Zinc Maanshan Iron & Steel (A) Maanshan Iron & Steel (H) National Aluminium Company POSCO POSCO (ADR) PT Adaro Energy Tbk PT Indo Tambangraya Megah Sesa Goa Steel Authority of India Sterlite Industries (India) Straits Asia Resources Tangshan Jidong Cement Co Tata Steel Wuhan Iron and Steel Jakarta SE Composite Index PTBA.JK 601600.SS 2600.HK 000898.SZ 0347.HK 600585.SS 0914.HK BANP.BK 600019.SS 2009.HK BSSL.BO BUMI.JK 3993.HK 3323.HK 2002q.L 2002.TW 001230.KS HALC.BO HZNC.BO 004020.KS 600362.SS 0358.HK JNSP.BO JSTL.BO 010130.KS 600808.SS 0323.HK NALU.BO 005490.KS PKX ADRO.JK ITMG.JK SESA.BO SAIL.BO STRL.BO STRL.SI 000401.SZ TISC.BO 600005.SS Nikhil Bhandari Julian Zhu Julian Zhu Julian Zhu Julian Zhu Julian Zhu Julian Zhu Nikhil Bhandari Julian Zhu Rowena Chang Pritesh Vinay Nikhil Bhandari Julian Zhu Julian Zhu Rowena Chang Rowena Chang Rajeev Das Pritesh Vinay Pritesh Vinay Rajeev Das Julian Zhu Julian Zhu Pritesh Vinay Pritesh Vinay Seung Shin Julian Zhu Julian Zhu Pritesh Vinay Rajeev Das Rajeev Das Nikhil Bhandari Nikhil Bhandari Pritesh Vinay Pritesh Vinay Pritesh Vinay Nikhil Bhandari Rowena Chang Pritesh Vinay Julian Zhu
Source: Factset, Quantum database.
19
March 18, 2011
Banpu (BANP.BK): Earnings reduction on Daning divestment; maintain Neutral

Banpu recently announced the divestment of its 56% owned Daning mine in China for a consideration of US$669 mn. According to the company announcement, the rationale of this divestment is in keeping with the Chinese governments policy regarding preferred investment ownership interests in Chinese coal mining companies. As a result, we reduce our 2011E-13E earnings forecasts by 13%-15%. Given the suspension of license for Daning late last year, we think the announcement alleviates market concerns about production from this mine. We maintain our Neutral rating on the stock. In addition to Daning, Banpu also owns stake in Hebi (17%) and Gaohe (45%) mines in China. While we note that Banpu do not own the majority stake in these mines, if Banpu were to sell these assets, there could be potential earnings downside impact of up to 15% in 2011-13 (based on earnings contribution from these mines). We reduce our 12-month Directors Cut-based target price to Bt725 (2% downside potential) from Bt800 on earnings reduction.
Risks Upside risks: Sharp rise in coal prices; Downside risks: A production shortfall or a
sharp fall in coal or oil prices.
Harum (HRUM.JK): Maintain Neutral

We raise our 12-month Directors Cut-based target price to Rp8,600 (5% downside potential) from Rp8,500 as higher costs in 2011E is more than offset by higher ASPs as company locked in the ASPs when coal prices were very high. Given that there is limited upside/downside potential to our new target price, we maintain our Neutral ratings on the stocks.
Risks Upside risks: Sharp rise in coal prices; Downside risks: A production shortfall or a
sharp fall in coal or oil prices.
Risks for the sector

Higher-than-expected oil prices: Coal prices and coal equities are both highly correlated
to oil prices. We are positive on the oil price cycle, although we believe coal prices may relatively underperform oil prices.
Coal prices may spike if there is a disruption in supplies: Coal demand is largely driven by electricity generation and tends to be relatively consistent. However, if there are unexpected supply disruptions (e.g., if heavy rains disrupt mining activities or if there is a logistics breakdown in the supply chain), then power producers may need to cover their requirements in the spot market. Given that a large part of the coal market is contracted on a one-year forward basis, spot volumes are relatively small and illiquid and hence an unexpected increase in spot demand could have a disproportionate impact on spot prices, causing them to spike. China demand being stronger than expected: China is the strongest demand driver for
thermal coal, with about 46% of world demand.
20
March 18, 2011
Exhibit 41: ASEAN coal sector: Operational comparison

Adaro Production profile 2007 2008 2009 2010E 2011E 2012E YoY growth 2007 2008 2009 2010E 2011E 2012E 2 year CAGR 2007-2009 3 year CAGR 2009-2012E Group ASP 2007 2008 2009 2010E 2011E 2012E ITMG Bukit Asam Bumi Straits Asia Harum
mn mn mn mn mn mn % % % % % % % %
tons tons tons tons tons tons
36.0 38.5 40.6 43.0 47.0 53.0 5% 7% 5% 6% 9% 13% 6% 9%
17.9 17.6 21.4 22.0 25.2 28.0 -9% -2% 22% 3% 15% 11% 9% 9%
9.3 10.8 11.5 12.5 15.2 17.4 0% 16% 7% 8% 22% 14% 12% 15%
54.2 53.2 63.1 60.0 67.0 76.0 7% -2% 19% -5% 12% 13% 8% 6%
3.4 8.6 8.4 10.6 11.3 14.0 -3% 154% -2% 25% 7% 24% 58% 18%
2.8 3.0 5.2 6.0 8.8 12.5 N.A. 8% 72% 17% 46% 43% 36% 34%
US$/ton US$/ton US$/ton US$/ton US$/ton US$/ton
32.8 43.2 58.9 56.9 71.4 70.7
44.3 73.5 73.5 75.0 85.8 91.0
46.0 60.3 72.7 69.5 82.7 85.8
44.0 73.5 60.6 71.4 81.5 81.6
45.1 73.5 86.1 73.3 83.2 84.3
36.1 65.1 72.4 75.2 86.3 83.5
Cash Production cost (inc royalty) 2007 US$/ton 2008 US$/ton 2009 US$/ton 2010E US$/ton 2011E US$/ton 2012E US$/ton Strip ratio 2007 2008 2009 2010E 2011E 2012E Based on 2009 Fuel cost as % of total costs Average royalty rate (%) Reserve life Coal characteristics Avg calorific value (2009) Sulphur (%) Ash (%) Moisture (%) Volatile Matter (%)
24.2 29.3 32.0 35.2 42.4 42.7
30.9 44.7 42.7 48.6 50.9 54.2
27.9 30.6 31.2 35.0 37.7 39.7
29.3 42.6 37.3 43.3 48.9 50.9
29.0 44.0 46.4 52.6 59.0 58.0
28.7 44.3 40.3 41.6 45.2 46.5
x x x x x x
4.3 4.3 5.0 5.4 6.0 5.7
9.2 11.7 12.9 13.0 12.2 12.2
3.5 3.5 3.5 3.5 3.5 3.5
8.5 8.5 8.5 9.1 9.1 9.1
5.4 7.3 9.8 9.7 10.6 9.7
10.1 12.5 13.1 11.4 10.4 10.1
% % years
16% 11% 22
35% 13% 15
20% 5% 172
30% 11% 45
40% 9% 14
35% 11% 24
kCal % % % %
5100 0.1% 2% 26% 43%
5871 0.7% 5% 17% 40%
5246 0.8% 6% 11% 40%
5604 0.8% 7% 15% 41%
5617 0.7% 9% 15% 39%
5750 <1% <9% 17% 38%-42%
Source: Company data, Goldman Sachs Research estimates
21
March 18, 2011
Exhibit 42: Bumi Resources -- summary financials

Profit model ($ mn) Total revenue Cost of goods sold SG&A R&D Other operating profit/(expense) EBITDA Depreciation & amortization EBIT Interest income Interest expense Income/(loss) from uncons. subs. Others Pretax profits Income tax Minorities Net income pre-preferred dividends Preferred dividends Net income (pre-exceptionals) Post-tax exceptionals Net income EPS (basic, pre-except) ($) EPS (basic, post-except) ($) EPS (diluted, post-except) ($) DPS ($) Dividend payout ratio (%) Free cash flow yield (%) Growth & margins (%) Sales growth EBITDA growth EBIT growth Net income growth EPS growth Gross margin EBITDA margin EBIT margin 12/09 3,219.3 (1,840.6) (457.5) 0.0 (10.8) 1,075.7 (165.3) 910.4 2.9 (180.9) 83.0 (62.4) 752.9 (340.4) (93.2) 319.4 0.0 319.4 (128.9) 190.4 0.02 0.01 0.01 0.01 50.3 (11.8) 12/09 (4.7) (11.5) (17.8) (70.5) (70.1) 42.8 33.4 28.3 12/10E 3,878.8 (2,217.1) (536.8) 0.0 (40.5) 1,289.9 (205.4) 1,084.5 30.3 (601.8) 270.0 0.0 783.0 (327.6) (180.6) 274.8 0.0 274.8 42.1 316.9 0.01 0.02 0.02 0.00 26.2 (4.8) 12/10E 20.5 19.9 19.1 66.4 63.4 42.8 33.3 28.0 12/11E 4,925.2 (2,771.1) (658.7) 0.0 (40.9) 1,662.2 (207.8) 1,454.4 49.4 (553.3) 216.3 0.0 1,166.9 (503.5) (232.7) 430.7 0.0 430.7 0.0 430.7 0.02 0.02 0.02 0.01 30.0 5.3 12/11E 27.0 28.9 34.1 35.9 29.0 43.7 33.7 29.5 12/12E 5,588.4 (3,293.2) (760.1) 0.0 (43.5) 1,713.1 (221.5) 1,491.6 39.4 (506.2) 271.1 0.0 1,295.9 (556.0) (239.8) 500.0 0.0 500.0 0.0 500.0 0.02 0.02 0.02 0.01 30.0 6.5 12/12E 13.5 3.1 2.6 16.1 16.1 41.1 30.7 26.7 Balance sheet ($ mn) Cash & equivalents Accounts receivable Inventory Other current assets Total current assets Net PP&E Net intangibles Total investments Other long-term assets Total assets Accounts payable Short-term debt Other current liabilities Total current liabilities Long-term debt Other long-term liabilities Total long-term liabilities Total liabilities Preferred shares Total common equity Minority interest Total liabilities & equity BVPS ($) 12/09 60.1 754.0 199.4 1,038.2 2,051.6 1,472.5 365.9 950.6 2,570.3 7,410.9 1,083.7 421.6 610.0 2,115.3 3,069.6 629.4 3,699.0 5,814.3 0.0 1,471.0 125.7 7,410.9 0.08 12/10E 571.7 865.7 182.2 1,038.2 2,657.8 1,625.2 340.9 1,450.0 2,475.6 8,549.6 957.0 640.0 516.9 2,113.8 3,624.0 440.7 4,064.7 6,178.6 0.0 2,064.7 306.3 8,549.6 0.11 12/11E 91.0 737.3 227.8 1,038.2 2,094.4 1,775.6 316.0 1,666.3 2,689.9 8,542.1 1,017.7 223.9 516.9 1,758.5 3,451.5 440.7 3,892.2 5,650.6 0.0 2,352.5 539.0 8,542.1 0.12 12/12E 164.2 582.8 270.7 1,038.2 2,055.9 1,914.1 291.0 1,937.4 2,918.6 9,117.0 1,074.9 795.4 516.9 2,387.2 2,807.7 440.7 3,248.4 5,635.6 0.0 2,702.6 778.8 9,117.0 0.13
Ratios ROE (%) ROA (%) ROACE (%) Inventory days Receivables days Payable days Net debt/equity (%) Interest cover - EBIT (X) Valuation
12/09 12.5 3.0 12.3 34.9 69.3 194.7 233.3 5.1 12/09 20.8 4.4 9.4 1.5
12/10E 17.9 4.0 14.2 31.4 76.2 168.0 178.8 1.9 12/10E 24.0 3.2 11.4 1.3
12/11E 19.5 5.0 15.2 27.0 59.4 130.1 152.4 2.9 12/11E 16.2 3.0 9.1 1.8
12/12E 19.8 5.7 15.0 27.6 43.1 116.0 127.2 3.2 12/12E 14.0 2.6 8.7 2.1
Cash flow statement ($ mn) Net income pre-preferred dividends D&A add-back Minorities interests add-back Net (inc)/dec working capital Other operating cash flow Cash flow from operations Capital expenditures Acquisitions Divestitures Others Cash flow from investments Dividends paid (common & pref) Inc/(dec) in debt Common stock issuance (repurchase) Other financing cash flows Cash flow from financing Total cash flow
12/09 319.4 165.3 93.2 (542.0) (49.8) 92.5 (423.0) (11.0) 0.0 (1,640.7) (2,074.7) (95.8) 2,191.9 210.9 (436.7) 1,870.2 (111.9)
12/10E 274.8 205.4 180.6 (221.2) (110.0) 299.3 (288.2) (229.4) 0.0 122.1 (395.5) (83.1) 330.9 360.0 0.0 607.8 511.6
12/11E 430.7 207.8 232.7 143.5 (66.1) 948.6 (288.2) 0.0 0.0 (259.3) (547.5) (129.2) (738.9) (13.7) 0.0 (881.8) (480.7)
12/12E 500.0 221.5 239.8 168.9 (119.5) 1,010.7 (290.0) 0.0 0.0 (273.6) (563.6) (150.0) (223.9) 0.0 0.0 (373.9) 73.2
P/E (analyst) (X) P/B (X) EV/EBITDA (X) Dividend yield (%)
Note: Last actual year may include reported and estimated data. Source: Company data, Goldman Sachs Research estimates.
22
March 18, 2011
Exhibit 43: Adaro -- summary financials

Profit model (Rp bn) Total revenue Cost of goods sold SG&A R&D Other operating profit/(expense) EBITDA Depreciation & amortization EBIT Interest income Interest expense Income/(loss) from uncons. subs. Others Pretax profits Income tax Minorities Net income pre-preferred dividends Preferred dividends Net income (pre-exceptionals) Post-tax exceptionals Net income EPS (basic, pre-except) (Rp) EPS (basic, post-except) (Rp) EPS (diluted, post-except) (Rp) DPS (Rp) Dividend payout ratio (%) Free cash flow yield (%) Growth & margins (%) Sales growth EBITDA growth EBIT growth Net income growth EPS growth Gross margin EBITDA margin EBIT margin 12/09 26,938.0 (15,900.1) (1,109.5) 0.0 0.0 11,198.1 (1,269.6) 9,928.4 68.2 (915.8) 0.0 (633.4) 8,447.4 (4,056.2) (48.6) 4,342.7 0.0 4,342.7 68.1 4,410.7 136 138 138 61 44.6 10.9 12/09 48.9 116.5 135.7 218.2 153.3 41.0 41.6 36.9 12/10E 24,495.5 (16,867.3) (953.2) 0.0 0.0 8,027.4 (1,352.2) 6,675.1 218.9 (1,121.6) 0.0 (507.1) 5,265.2 (2,580.0) (24.1) 2,661.2 0.0 2,661.2 (276.0) 2,385.2 83 75 75 21 27.9 (0.1) 12/10E (9.1) (28.3) (32.8) (45.9) (45.9) 31.1 32.8 27.3 12/11E 32,685.9 (21,519.7) (1,114.3) 0.0 0.0 11,669.4 (1,617.5) 10,051.8 117.1 (1,005.6) 0.0 (507.1) 8,656.2 (3,981.9) (46.7) 4,627.6 0.0 4,627.6 0.0 4,627.6 145 145 145 36 25.0 0.5 12/11E 33.4 45.4 50.6 94.0 94.0 34.2 35.7 30.8 12/12E 36,148.9 (24,295.2) (1,183.4) 0.0 0.0 12,622.9 (1,952.5) 10,670.4 63.4 (832.8) 0.0 (507.1) 9,393.9 (4,227.3) (51.7) 5,115.0 0.0 5,115.0 0.0 5,115.0 160 160 160 40 25.0 5.4 12/12E 10.6 8.2 6.2 10.5 10.5 32.8 34.9 29.5 Balance sheet (Rp bn) Cash & equivalents Accounts receivable Inventory Other current assets Total current assets Net PP&E Net intangibles Total investments Other long-term assets Total assets Accounts payable Short-term debt Other current liabilities Total current liabilities Long-term debt Other long-term liabilities Total long-term liabilities Total liabilities Preferred shares Total common equity Minority interest Total liabilities & equity BVPS (Rp) 12/09 11,274.6 2,903.6 250.5 1,408.2 15,836.9 17,207.3 9,091.8 4.8 324.7 42,465.4 5,158.2 2,507.0 330.8 7,996.0 13,516.5 3,441.0 16,957.4 24,953.5 0.0 17,444.9 67.0 42,465.4 545 12/10E 6,033.0 3,020.0 372.0 1,650.0 11,075.0 19,005.1 8,578.0 3,019.8 337.2 42,015.1 4,621.2 2,752.7 330.8 7,704.7 11,613.5 3,441.0 15,054.5 22,759.2 0.0 19,164.8 91.1 42,015.1 599 12/11E 3,266.4 4,029.8 474.3 1,650.0 9,420.4 23,477.6 8,070.9 3,019.8 349.7 44,338.3 5,895.8 2,752.7 330.8 8,979.3 9,144.6 3,441.0 12,585.6 21,564.9 0.0 22,635.5 137.9 44,338.3 708 12/12E 4,169.9 4,456.7 530.3 1,650.0 10,806.9 25,005.1 7,563.8 3,019.8 362.2 46,757.7 6,656.2 2,752.7 330.8 9,739.7 6,915.8 3,441.0 10,356.8 20,096.5 0.0 26,471.7 189.5 46,757.7 828
12/09 28.0 11.6 22.0 6.4 35.6 109.4 27.2 11.7 12/09 17.1 4.3 3.9 2.6
12/10E 13.0 5.6 12.6 6.7 44.1 105.8 43.5 7.4 12/10E 27.9 3.9 10.3 0.9
12/11E 22.1 10.7 17.5 7.2 39.4 89.2 38.1 11.3 12/11E 16.1 3.3 7.1 1.6
12/12E 20.8 11.2 17.6 7.5 42.8 94.3 20.8 13.9 12/12E 14.5 2.8 6.3 1.7
Cash flow statement (Rp bn) Net income pre-preferred dividends D&A add-back Minorities interests add-back Net (inc)/dec working capital Other operating cash flow Cash flow from operations Capital expenditures Acquisitions Divestitures Others Cash flow from investments Dividends paid (common & pref) Inc/(dec) in debt Common stock issuance (repurchase) Other financing cash flows Cash flow from financing Total cash flow
12/09 4,342.7 1,269.6 48.6 630.5 507.1 6,735.6 (2,095.1) (446.8) 0.0 131.0 (2,411.0) (1,965.3) 4,775.8 990.2 (362.6) 3,438.1 7,762.7
12/10E 2,661.2 1,352.2 24.1 (1,016.8) 507.1 3,527.8 (3,150.0) (3,020.9) 0.0 (276.0) (6,446.9) (665.3) (1,657.3) 0.0 0.0 (2,322.6) (5,241.7)
12/11E 4,627.6 1,617.5 46.7 162.7 507.1 6,961.7 (6,090.0) (12.5) 0.0 0.0 (6,102.5) (1,156.9) (2,468.9) 0.0 0.0 (3,625.8) (2,766.6)
12/12E 5,115.0 1,952.5 51.7 277.4 507.1 7,903.7 (3,480.0) (12.5) 0.0 0.0 (3,492.5) (1,278.7) (2,228.9) 0.0 0.0 (3,507.6) 903.5
23
March 18, 2011
Exhibit 44: Straits Asia (SAR) -- summary financials

Profit model ($ mn) Total revenue Cost of goods sold SG&A R&D Other operating profit/(expense) EBITDA Depreciation & amortization EBIT Interest income Interest expense Income/(loss) from uncons. subs. Others Pretax profits Income tax Minorities Net income pre-preferred dividends Preferred dividends Net income (pre-exceptionals) Post-tax exceptionals Net income EPS (basic, pre-except) ($) EPS (basic, post-except) ($) EPS (diluted, post-except) ($) DPS ($) Dividend payout ratio (%) Free cash flow yield (%) Growth & margins (%) Sales growth EBITDA growth EBIT growth Net income growth EPS growth Gross margin EBITDA margin EBIT margin 12/10 736.5 (555.6) (36.5) 0.0 3.2 185.9 (38.3) 147.6 0.7 (12.8) 0.0 (13.0) 122.4 (36.5) 0.0 85.9 0.0 85.9 2.3 88.2 0.08 0.08 0.08 0.04 49.4 0.9 12/10 (1.6) (34.6) (40.1) (33.9) (35.1) 24.6 25.2 20.0 12/11E 867.7 (636.4) (55.7) 0.0 3.2 221.5 (42.7) 178.8 0.6 (16.9) 0.0 0.0 162.5 (48.8) 0.0 113.8 0.0 113.8 0.0 113.8 0.10 0.10 0.10 0.05 49.4 0.5 12/11E 17.8 19.2 21.1 29.0 33.3 26.7 25.5 20.6 12/12E 1,097.5 (773.3) (65.1) 0.0 3.2 306.6 (44.3) 262.2 0.5 (20.4) 0.0 0.0 242.4 (72.7) 0.0 169.7 0.0 169.7 0.0 169.7 0.16 0.16 0.16 0.08 49.4 4.7 12/12E 26.5 38.4 46.7 49.1 49.1 29.5 27.9 23.9 12/13E 1,226.7 (866.1) (70.4) 0.0 3.2 340.3 (46.8) 293.4 0.7 (20.4) 0.0 0.0 273.7 (82.1) 0.0 191.6 0.0 191.6 0.0 191.6 0.18 0.18 0.18 0.09 49.4 6.6 12/13E 11.8 11.0 11.9 12.9 12.9 29.4 27.7 23.9 Balance sheet ($ mn) Cash & equivalents Accounts receivable Inventory Other current assets Total current assets Net PP&E Net intangibles Total investments Other long-term assets Total assets Accounts payable Short-term debt Other current liabilities Total current liabilities Long-term debt Other long-term liabilities Total long-term liabilities Total liabilities Preferred shares Total common equity Minority interest Total liabilities & equity BVPS ($) 12/10 80.7 113.4 21.3 43.6 259.1 734.7 84.7 0.0 19.5 1,098.0 160.0 0.0 7.9 167.9 313.2 93.1 406.3 574.2 0.0 523.8 0.0 1,098.0 0.46 12/11E 61.7 142.6 47.5 43.6 295.5 786.6 68.3 0.0 19.5 1,169.9 174.3 0.0 7.9 182.2 313.2 93.1 406.3 588.5 0.0 581.3 0.0 1,169.9 0.53 12/12E 85.3 180.4 60.1 43.6 369.5 836.6 67.7 0.0 19.5 1,293.2 211.9 0.0 7.9 219.7 313.2 93.1 406.3 626.0 0.0 667.2 0.0 1,293.2 0.61 12/13E 135.0 201.7 67.2 43.6 447.5 881.6 67.1 0.0 19.5 1,415.6 237.3 0.0 7.9 245.2 313.2 93.1 406.3 651.5 0.0 764.2 0.0 1,415.6 0.70
12/10 17.7 8.5 13.7 17.4 52.4 94.1 44.4 12.1 12/10 23.0 3.9 11.1 2.1
12/11E 20.6 10.0 15.8 19.7 53.9 95.9 43.3 11.0 12/11E 17.4 3.4 10.1 2.8
12/12E 27.2 13.8 21.2 25.4 53.7 91.1 34.2 13.2 12/12E 11.7 3.0 7.2 4.2
12/13E 26.8 14.1 22.4 26.8 56.8 94.6 23.3 14.9 12/13E 10.3 2.6 6.3 4.8
12/10 85.9 38.3 0.0 (26.6) 0.0 96.6 (70.8) (13.1) 0.0 0.2 (83.8) (43.6) 106.7 7.0 (59.1) 11.1 24.0
12/11E 113.8 42.7 0.0 (41.1) 0.0 115.4 (94.6) 0.0 0.0 16.4 (78.2) (56.2) 0.0 0.0 0.0 (56.2) (19.0)
12/12E 169.7 44.3 0.0 (12.8) 0.0 201.1 (94.3) 0.0 0.0 0.6 (93.7) (83.8) 0.0 0.0 0.0 (83.8) 23.6
12/13E 191.6 46.8 0.0 (2.9) 0.0 235.5 (91.8) 0.0 0.0 0.6 (91.2) (94.7) 0.0 0.0 0.0 (94.7) 49.7
24
March 18, 2011
Exhibit 45: ITMG -- summary financials

Profit model ($ mn) Total revenue Cost of goods sold SG&A R&D Other operating profit/(expense) EBITDA Depreciation & amortization EBIT Interest income Interest expense Income/(loss) from uncons. subs. Others Pretax profits Income tax Minorities Net income pre-preferred dividends Preferred dividends Net income (pre-exceptionals) Post-tax exceptionals Net income EPS (basic, pre-except) ($) EPS (basic, post-except) ($) EPS (diluted, post-except) ($) DPS ($) Dividend payout ratio (%) Free cash flow yield (%) Growth & margins (%) Sales growth EBITDA growth EBIT growth Net income growth EPS growth Gross margin EBITDA margin EBIT margin 12/10 1,668.2 (1,126.6) (178.7) -0.0 423.9 (61.0) 362.9 5.4 (3.2) 0.0 (7.7) 357.4 (94.3) 0.0 263.1 0.0 263.1 (80.0) 183.0 0.23 0.16 0.16 0.19 116.5 4.5 12/10 10.6 (14.1) (16.7) (45.5) (45.5) 32.5 25.4 21.8 12/11E 2,162.6 (1,316.2) (190.1) -0.0 729.8 (73.5) 656.3 5.9 0.0 0.0 0.0 662.2 (165.6) 0.0 496.7 0.0 496.7 0.0 496.7 0.44 0.44 0.44 0.33 75.0 5.3 12/11E 29.6 72.2 80.9 171.4 171.4 39.1 33.7 30.3 12/12E 2,548.0 (1,556.6) (224.0) -0.0 853.4 (86.0) 767.4 5.7 0.0 0.0 0.0 773.1 (193.3) 0.0 579.8 0.0 579.8 0.0 579.8 0.51 0.51 0.51 0.38 75.0 9.5 12/12E 17.8 16.9 16.9 16.7 16.7 38.9 33.5 30.1 12/13E 2,645.6 (1,652.2) (216.9) -0.0 874.7 (98.1) 776.6 8.3 0.0 0.0 0.0 784.8 (196.2) 0.0 588.6 0.0 588.6 0.0 588.6 0.52 0.52 0.52 0.39 75.0 9.9 12/13E 3.8 2.5 1.2 1.5 1.5 37.6 33.1 29.4 Balance sheet ($ mn) Cash & equivalents Accounts receivable Inventory Other current assets Total current assets Net PP&E Net intangibles Total investments Other long-term assets Total assets Accounts payable Short-term debt Other current liabilities Total current liabilities Long-term debt Other long-term liabilities Total long-term liabilities Total liabilities Preferred shares Total common equity Minority interest Total liabilities & equity BVPS ($) 12/10 294.6 151.4 70.5 91.6 608.2 348.3 0.0 0.0 133.3 1,089.7 94.8 0.0 236.7 331.5 0.0 37.2 37.2 368.7 0.0 721.0 0.0 1,089.7 0.64 12/11E 189.4 266.6 79.3 91.6 626.9 415.6 0.0 0.0 153.6 1,196.2 104.6 0.0 209.3 313.8 0.0 37.2 37.2 351.0 0.0 845.2 0.0 1,196.2 0.75 12/12E 275.5 314.1 93.8 91.6 775.1 461.7 0.0 0.0 151.9 1,388.7 123.7 0.0 237.7 361.4 0.0 37.2 37.2 398.6 0.0 990.1 0.0 1,388.7 0.88 12/13E 405.0 326.2 99.6 91.6 922.4 497.0 0.0 0.0 118.1 1,537.5 131.3 0.0 231.8 363.1 0.0 37.2 37.2 400.2 0.0 1,137.3 0.0 1,537.5 1.01
12/10 24.3 16.0 62.2 21.9 33.1 29.8 (40.9) NM 12/10 21.0 7.7 10.9 3.9
12/11E 63.4 43.5 91.0 20.8 35.3 27.6 (22.4) NM 12/11E 11.1 6.5 7.3 6.8
12/12E 63.2 44.9 84.0 20.3 41.6 26.8 (27.8) NM 12/12E 9.5 5.6 6.1 7.9
12/13E 55.3 40.2 80.5 21.4 44.2 28.2 (35.6) NM 12/13E 9.4 4.9 5.8 8.0
12/10 263.1 61.0 0.0 (62.9) 0.0 282.3 (65.7) 0.0 0.0 (31.3) (97.0) (213.1) (55.1) (57.5) 6.3 (319.3) (134.0)
12/11E 496.7 73.5 0.0 (141.7) 0.0 428.5 (140.8) 0.0 0.0 (20.4) (161.2) (372.5) 0.0 0.0 0.0 (372.5) (105.2)
12/12E 579.8 86.0 0.0 (14.4) 0.0 651.4 (132.1) 0.0 0.0 1.7 (130.4) (434.9) 0.0 0.0 0.0 (434.9) 86.2
12/13E 588.6 98.1 0.0 (16.1) 0.0 670.6 (133.4) 0.0 0.0 33.8 (99.6) (441.5) 0.0 0.0 0.0 (441.5) 129.5
25
March 18, 2011
Exhibit 46: Bukit Asam (PTBA) -- summary financials

Profit model (Rp bn) Total revenue Cost of goods sold SG&A R&D Other operating profit/(expense) EBITDA Depreciation & amortization EBIT Interest income Interest expense Income/(loss) from uncons. subs. Others Pretax profits Income tax Minorities Net income pre-preferred dividends Preferred dividends Net income (pre-exceptionals) Post-tax exceptionals Net income EPS (basic, pre-except) (Rp) EPS (basic, post-except) (Rp) EPS (diluted, post-except) (Rp) DPS (Rp) Dividend payout ratio (%) Free cash flow yield (%) Growth & margins (%) Sales growth EBITDA growth EBIT growth Net income growth EPS growth Gross margin EBITDA margin EBIT margin 12/10 7,909.2 (4,259.0) (1,346.0) 0.0 0.0 2,398.8 (94.6) 2,304.2 244.3 0.0 (5.6) 89.5 2,632.4 (608.3) 10.0 2,034.1 0.0 2,034.1 (25.2) 2,008.9 883 872 872 322 36.9 4.8 12/10 (11.6) (34.3) (35.1) (26.4) (26.3) 46.2 30.3 29.1 12/11E 11,340.0 (5,350.1) (1,518.5) 0.0 0.0 4,593.0 (121.6) 4,471.4 262.2 0.0 0.0 0.0 4,733.6 (1,183.4) (64.9) 3,485.3 0.0 3,485.3 0.0 3,485.3 1,513 1,513 1,513 559 36.9 5.6 12/11E 43.4 91.5 94.1 73.5 73.5 52.8 40.5 39.4 12/12E 13,205.4 (6,293.1) (1,677.1) 0.0 0.0 5,383.6 (148.4) 5,235.2 322.5 0.0 0.0 0.0 5,557.7 (1,389.4) (124.4) 4,043.9 0.0 4,043.9 0.0 4,043.9 1,755 1,755 1,755 648 36.9 7.6 12/12E 16.5 17.2 17.1 16.0 16.0 52.3 40.8 39.6 12/13E 13,961.3 (7,062.3) (1,817.6) 0.0 0.0 5,264.6 (183.1) 5,081.4 419.3 0.0 0.0 0.0 5,500.7 (1,375.2) (108.3) 4,017.2 0.0 4,017.2 0.0 4,017.2 1,743 1,743 1,743 644 36.9 8.0 12/13E 5.7 (2.2) (2.9) (0.7) (0.7) 49.4 37.7 36.4 Balance sheet (Rp bn) Cash & equivalents Accounts receivable Inventory Other current assets Total current assets Net PP&E Net intangibles Total investments Other long-term assets Total assets Accounts payable Short-term debt Other current liabilities Total current liabilities Long-term debt Other long-term liabilities Total long-term liabilities Total liabilities Preferred shares Total common equity Minority interest Total liabilities & equity BVPS (Rp) 12/10 5,054.1 1,017.4 423.7 150.8 6,646.0 1,108.5 327.6 271.0 369.6 8,722.7 1,019.2 0.0 128.5 1,147.7 0.0 1,133.7 1,133.7 2,281.5 0.0 6,366.7 74.5 8,722.7 2,763 12/11E 6,215.8 1,553.4 513.0 150.8 8,433.0 2,030.9 327.6 271.0 369.6 11,432.1 1,465.8 0.0 128.5 1,594.3 0.0 1,133.7 1,133.7 2,728.0 0.0 8,564.7 139.4 11,432.1 3,717 12/12E 8,081.2 1,809.0 603.4 150.8 10,644.4 2,752.5 327.6 271.0 369.6 14,365.1 1,724.1 0.0 128.5 1,852.6 0.0 1,133.7 1,133.7 2,986.4 0.0 11,115.0 263.8 14,365.1 4,824 12/13E 10,069.5 1,912.5 677.2 150.8 12,810.1 3,439.4 327.6 271.0 369.6 17,217.6 1,934.9 0.0 128.5 2,063.4 0.0 1,133.7 1,133.7 3,197.1 0.0 13,648.5 372.1 17,217.6 5,923
12/10 33.3 23.9 149.1 35.7 58.5 98.5 (78.5) NM 12/10 23.2 7.4 15.2 1.6
12/11E 46.7 34.6 173.1 32.0 41.4 84.8 (71.4) NM 12/11E 13.5 5.5 8.9 2.7
12/12E 41.1 31.4 135.7 32.4 46.5 92.5 (71.0) NM 12/12E 11.7 4.2 7.3 3.2
12/13E 32.4 25.4 105.2 33.1 48.6 94.6 (71.8) NM 12/13E 11.7 3.5 7.0 3.1
Cash flow statement (Rp bn) Net income pre-preferred dividends D&A add-back Minorities interests add-back Net (inc)/dec working capital Other operating cash flow Cash flow from operations Capital expenditures Acquisitions Divestitures Others Cash flow from investments Dividends paid (common & pref) Inc/(dec) in debt Common stock issuance (repurchase) Other financing cash flows Cash flow from financing Total cash flow
12/10 2,034.1 94.6 (10.0) 249.2 0.0 2,375.5 (557.4) (318.8) 0.0 (32.7) (908.9) (742.0) 0.0 (601.5) 221.9 (1,121.6) 345.0
12/11E 3,485.3 121.6 64.9 (178.8) 0.0 3,493.0 (1,044.0) 0.0 0.0 0.0 (1,044.0) (1,287.3) 0.0 0.0 0.0 (1,287.3) 1,161.7
12/12E 4,043.9 148.4 124.4 (87.6) 0.0 4,229.1 (870.0) 0.0 0.0 0.0 (870.0) (1,493.6) 0.0 0.0 0.0 (1,493.6) 1,865.4
12/13E 4,017.2 183.1 108.3 33.4 0.0 4,342.1 (870.0) 0.0 0.0 0.0 (870.0) (1,483.8) 0.0 0.0 0.0 (1,483.8) 1,988.3
26
March 18, 2011
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Goldman Sachs Asian Coal 18 March 2011

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March 18, 2011

ASEAN: Metals & Mining: Coal

Rising costs compound squeeze from lower coal prices; Cautious

* 19% based on 5 year long dated oil (CL 60)

ASEAN COAL SECTOR: VALUATION TABLE

Rising costs to keep a lid on margins; remain cautious

TARGET PRICES AND RATINGS

GS rating Ticker HRUM.JK ADRO.JK BUMI.JK ITMG.JK BANP.BK PTBA.JK STRL.SI

Potential ups/dwn -5% -14% -24% 6% -2% -10% -20%

Downgrade Adaro, SAR to Sell; maintain Sell on Bumi (Conv List)

Raise ITMG to Buy; PTBA to Neutral post recent underperformance

The Goldman Sachs Group, Inc.

Global Investment Research

March 18, 2011

ASEAN: Metals & Mining: Coal

Goldman Sachs Global Investment Research

March 18, 2011

ASEAN: Metals & Mining: Coal

Coal prices to correct further on easing demand and rising supply

Exhibit 2: Coal and oil (WTI) price assumptions

* 19% based on 5 year long dated oil (CL 60)

Source: Global Coal.

Source: Bloomberg, Global Coal, Goldman Sachs Research estimates.

by further 19% to come at parity with Chinas domestic coal prices.

Source: Global Coal, CCTD, Goldman Sachs Research estimates.

Source: Global Coal, CCTD, Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research

March 18, 2011

ASEAN: Metals & Mining: Coal

Japan earthquake: coal consumption may slow near-term

contributed about 7 MT of coal shipments in 2010 (most of it came in 2H of 2010).

Goldman Sachs Global Investment Research

March 18, 2011

ASEAN: Metals & Mining: Coal

Exhibit 5: Discount between Indonesias sub-bituminous coal and Newcastle is widening

Exhibit 6: Newcastle coal shipments: +10% yoy in 2010

-24% -26% -28% -30% -32% -34% -36%

Discount widens as Indo coal supply improves

-38% -40% 1-Jul-09

Source: McCloskey. Goldman Sachs Research.

Days 30 2005-2010 range 2011

Source: SXCoal, CEIC.

Source: SXCoal, CEIC, Goldman Sachs Research.

Goldman Sachs Global Investment Research

March 18, 2011

ASEAN: Metals & Mining: Coal

Exhibit 9: Coal price as % of oil (heat equivalent basis)

Source: Bloomberg, Global Coal.

Source: Goldman Sachs Research estimates.

Thermal coal supply may continue to improve structurally

Goldman Sachs Global Investment Research

March 18, 2011

ASEAN: Metals & Mining: Coal

Exhibit 11: Indonesiacapacity utilization declining

Exhibit 12: Newcastles coal terminal capacity (MT)

Utilization rate (RHS)

95% 90% 85%

Source: Company data, Goldman Sachs Research estimates.

Source: NCIG, Goldman Sachs Research estimates.

Exhibit 13: Global thermal coal supply-demand balance

* Estimates of IEA. Source: IEA, Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research

March 18, 2011