1.80,-22%,October 22, 2010 ASEAN: Metals Sell PTBA, Adaro to Neutral Coal price may rise in short-term on weather/seasonality,Recent weather-related disruptions to supply out of Australia and Indonesia,COAL AND OIL (WTI) PRICE ASSUMPTIONS,(due to heavy rainfall) may possibly tighten the market during winter. Also, the World Meteorological Organization (WMO) under the United Nations expects,Coal price (NEWC, CY) US$/t YoY growth % %,2009 2010E 2011E 2012E 73 95 100 100 -43% 30% 5% 0%,that La Nia conditions may further strengthen during the next 4-6 months, characterized by unusually cool ocean temperatures. Our analysis also,WTI oil price YoY growth % Coal as % of oil equiv,US$/bbl % %,62 -38% 25%*,82 32% 24%,100 22% 21%,110 10% 19%,indicates that coal prices rise seasonally during winter on strong coal demand. Rally may be short-lived; rising supply ahead,* 19% based on 5 year long dated oil (CL 60) ASEAN COAL SECTOR: VALUATION TABLE,Thermal coal supply continues to improve structurally (in line with our,Market Liquidity,EV/EBITDA,expectations), but we think it may further ease on various supply-side improvements which are in progress (mainly Indonesia, Australia and South Africa). Moreover Chinas thermal coal imports may be flat to lower,Ticker ADRO.JK BUMI.JK ITMG.JK,Curr IDR IDR IDR,Price 19-Oct 2,175 2,350 45,100,cap US$ m 7,724 5,028 5,657,6-mos US$ m 15.6 23.6 5.3,P/E (X) 10E 11E 20.8 12.1 15.5 11.1 17.2 11.9,(X) 10E 11E 7.7 5.1 7.2 5.7 10.5 7.3,in 2011E due to rising shanxi production, weaker growth of coal fired power plants and easing railway bottleneck.,BANP.BK PTBA.JK STRL.SI,THB IDR S$,744 20,200 2.31,6,256 5,169 1,836,36.4 6.3 7.4,16.0 20.2 22.5,11.6 13.2 14.9,12.1 13.8 10.7,7.1 8.9 7.5,Valuations near or above mid-cycle; remain stock-selective ASEAN coal stocks have rallied up by 16% over last month, we think due to,TARGET PRICES AND RATINGS,rising oil prices, US$ weakness and anticipation of tighter market during,GS rating,Curr,Price,12-mo TP,Potential,winter. Stocks are generally trading at or above mid-cycle on 2011E,Ticker ADRO.JK,Old Buy,New Neutral,IDR,19-Oct 2,175,Old 2,500,New ups/dwn 2,300 6%,EV/EBITDA so we remain stock-selective. We revise our 12-m TPs by -8% to +25%, as we adjust our 2010E-12E NP estimates by -14% to +13% and,BUMI.JK ITMG.JK BANP.BK PTBA.JK,Neutral Neutral Neutral Neutral,Neutral Neutral Neutral Sell,IDR IDR THB IDR,2,350 45,100 744 20,200,1,800 42,500 570 17,400,2,250 42,500 680 17,200,-4% -6% -9% -15%,update our Directors Cut valuation plot. Downgrade PTBA to Sell, Adaro to Neutral; reiterate Sell (CL) SAR We downgrade PTBA to Sell from Neutral on rich valuations (8.9X 2011E EV/EBITDA is highest in the ASEAN coal sector) and our belief that the railway projects may see implementations risks (e.g. land acquisitions) while market is pricing in no delay for its project completions. We reiterate our Sell (CL) rating on SAR as we think market may be too optimistic on its growth potential. Our new 2010E-11E NP estimates for SAR are 6%-38% below Bloomberg consensus, and we continue to see delay in Sebuku ramp-up. We downgrade Adaro to Neutral from Buy as we reduce our earnings estimates by 10-14% on higher costs and lower production forecasts. While we remain Neutral on Bumi, we note that stock has high beta and is highly sensitive to coal prices. Key risks Lower than expected oil prices or lower than expected Chinese demand.,STRL.SI Sell* Sell* S$ 2.31 1.70 *This stock is on our regional Conviction List. Note: Our 12-month target prices are based on 2011E Directors Cut methodology. Source: Bloomberg, Company data, Goldman Sachs Research estimates.,Nikhil Bhandari +65-6889-2867 nikhil.bhandarigs.com Goldman Sachs (Singapore) Pte Patrick Tiah, CFA +65-6889-2468 patrick.tiahgs.com Goldman Sachs (Singapore) Pte The Goldman Sachs Group, Inc.,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. Global Investment Research,Index(July=100),Jan-06,Jul-06,Jan-07,Jul-07,Jan-08,Jul-08,Jan-09,Jul-09,Jan-10,Jul-10,Apr-06,Oct-06,Apr-07,Oct-07,Apr-08,Oct-08,Apr-09,Oct-09,Apr-10,2,2,3,4,5,6,7,7,11,12,13,2,October 22, 2010 Table of contents S-T upside risks to coal prices but rising supply ahead Coal price may rise on weather disruptions/seasonality. . Rally may be short-lived due to rising supply ahead Potential over-supply of coal in China; impo