High coal prices fuel SAR's stock advice upgrade

Now is the best time to buy Straits Asia Resources stocks as valuations and a 276% YoY jump in profit make the company look attractive, DMG Research said.

SAR's net profit for 1Q11 jumped to US$42mln due to a combination of higher than expected production from Sebuku, higher than expected ASP, and lower than expected costs.

DMG Research has raised its FY11 and FY12 net profit forecast by 29% and 40%, respectively, on the back of higher coal price assumptions and the issuance of Northern Leases permits expected within a few months.

The two factors also drove the analyst to upgrade its FY11 and FY12 coal price assumptions by 19-24% to US$125/tonne and US$130/tonne respectively, with a long term price assumption of US$90/tonne.

"This comes on the back of strong demand for Indonesian coal, and we align our price assumptions to that of our Indonesian Coal Sector analyst," DMG Research said.

SAR is currently trading at 14.1x FY11 P/E, given its earnings growth of 90% for FY11. The analyst's target price of S$3.08 is based on 16.3x FY11 P/E, a 15% premium to peers.

"We believe this premium is justified given the potential permit issuance acting as a positive catalyst," DMG Research said.

If you've been wondering whether SBR could work for your company — yes, probably.

A lot of the companies we partner with started as readers. They'd been following our coverage for a while, saw their own customers and competitors in it, and eventually asked the obvious question: could we do something with you? The answer is usually yes. The shape of it depends on what you're trying to do.

The options are broader than most people assume — thought leadership articles, sponsored content, industry summits across Southeast Asia, regional awards programmes, podcasts, and media placements in print and digital. Some partners use one channel; most use a mix. We figure out the right combination by starting with your brief, not with our rate card.

So if the question has been on your mind, here's the easy way to ask it.

We'll tell you honestly whether we can help, and how. It's a better use of everyone's time.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia