Asia Pacific Equity Research

31 August 2010

Overweight
Adaro Energy ADRO.JK, ADRO IJ
Price: Rp1,980
2Q10 result is weak and significantly below
Price Target: Rp2,600
expectation

1H10 net income significantly below expectations: Adaro reported Indonesia

1H10 net income of Rp1,153 bn, down 48.7%Y/Y. As, historically, 1H Mining
contributes 50.8% to the full year forecast, the reported 1H10 net income Stevanus Juanda
AC

came in significantly below both JPM's (31.6%) and consensus' (29.6%) (62-21) 5291 8574
forecast of Rp3,648 bn and Rp3,893 bn, respectively. stevanus.x.juanda@jpmorgan.com
PT J.P. Morgan Securities Indonesia
2Q10 was weak: Subtracting the 1Q10 result, 2Q10 net income of
Rp292 bn declined 73.5% Y/Y and 66.1% Q/Q. The reason for this weak Price Performance
performance was that the Rp strengthened by 13.5% Y/Y and 1.6% Q/Q. 2,400

Sales volume declined 10.2% Q/Q on the back of heavy rain in 2Q10. Rp 1,800
Despite this, on a Y/Y basis sales volume rose by 13.1%; lower ASP and
1,200
stronger Rp caused revenue to fall 10.3% Y/Y. With ASP per ton down
Aug-09 Nov-09 Feb-10 May-10 Aug-10
by 20.7%Y/Y in Rp terms, cost per ton failed to catch up, falling only by
ADRO.JK share price (Rp)
5.6%Y/Y. JCI (rebased)

YTD 1m 3m 12m
In USD terms, 2Q10 was weak: Although the strengthening of the Rp
Abs 14.5% -1.0% 3.7% 45.6%
has negatively affected the operating result, our analysis of 2Q10 results Rel -7.8% -2.0% -7.1% 13.2%
in US$ terms indicates that 2Q10 net income was also disappointing.
2Q10 net income fell 69.4% on the back of higher interest income, forex Company data
losses and other non- operational charges. Adjusted for these non-
recurring items, 2Q10 core net income reached US$40.6MM; down
60.8% Y/Y and 56.1% Q/Q. In summary, 2Q10 net income was weak.

Will revisit model; maintain OW and PT of Rp2,600: Meanwhile, we

view that the share price could decline on the back of the weak 2Q10
results. We see risk to our and consensus forecasts; and note that our
estimates are currently under review. We maintain our Overweight rating Source: Bloomberg
and PT of Rp2,600, but will follow up with more detail analysis.

1H10 financial snapshots (Bloomberg: ADRO IJ; Reuters: ADRO.JK)

Rp in billions; %
Y/Y Y/Y Q/Q JPM % of Mkt % of Valuations FY10E FY11E
1H10 1H09 (%) 2Q10 2Q09 (%) (%) Est target Est target EPS (Rp) 113 150
Revenue 11,985 12,897 -7.1% 5,706 6,364 -10.3% -9.1% 28,407 42.2% 26,745 44.8% BVPS (Rp) 604 709
Op Profit 3,570 4,931 -27.6% 1,513 2,484 -39.1% -26.4% 8,272 43.2% 8,633 41.3% DPS (Rp) 45.1 60.1
Net Income 1,153 2,249 -48.7% 292 1,103 -73.5% -66.1% 3,648 31.6% 3,893 29.6% P/E (x) 17.6 13.2
EPS 36 70 -48.8% 9 34 -73.6% -66.2% 114 31.6% 119 30.3% P/B (x) 3.3 2.8
ROE (%) 19.6 22.9
Yield (%) 2.3 3.0
Source: Company data and JP Morgan calculations

See page 7 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan 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.
Stevanus Juanda Asia Pacific Equity Research
(62-21) 5291 8574 31 August 2010
stevanus.x.juanda@jpmorgan.com

Company description P&L sensitivity metrics EBIT EPS

impact impact
FY10E (%) (%)
Adaro is the second largest coal company in Indonesia. In Sales volume assumption (45.5MM tons)
FY09, it produced 40.6MM tons of coal and has 870MM tons
Impact of each 10% 11.7% 15.4%
of reserve (@US$55/ton assumption) and very low strip ratio
which make its cost low. Its 5,200 kcal coal: Envirocoal, has Coal price assumption (US$95/ton)
world wide acceptance from global power plants due to its Impact of each 10% 20.2% 25.6%
very low ash, sulfur, and nitrogen content. It intends to pursue Subsidiaries rev assumption (Rp 4 trillion)
a vertically integrated strategy as aside from coal mining, it Impact of each 10% 4.8% 10.7%
also has subsidiaries operating in mining contracting, barging,
Cost assumption (US$40.1/ton)
port, and water toll operators. Its future earnings will likely
Impact of each 10% -19.9% -24.5%
be driven by volume growth, cost reduction and increased
subsidiaries' profitability. Adaro volume is expected to Average IDR/USD assumption (US$9,000/US$1)
double in 5 years and cost could be reduced by US$1-2/ton Impact of each 10% 11.4% 14.7%
when the conveyer is completed. The subsidiaries Source: JP Morgan estimates
contribution to future earnings is likely to increase over time:
from 5.2% in FY10E to 21.6% in FY15E. Price target and valuation
analysis
Our price target is derived using the DCF method. From
FY10E production volume of 45.5MM tons, volume is
Revenue segment chart
expected to grow by 9.6% in the long run. Coal price is
expected to average US$95/ton in FY10 and the long-
term real average price is assumed at US$80/ton, and
growing at its historical average rate of 10% CAGR. In
FY10, total cost is expected to be at US$40.1/ton,
growing at an average rate of 6.7% in the long term. Our
DCF value is derived using a risk-free rate of 10.0%,
equity risk premium of 5.5% and terminal growth rate of
5.5%.

Risk-free rate: 10.0%

Market risk premium: 5.5%
Beta: 1.05
Debt/equity: 26.2%
Source: Company reports, J.P. Morgan estimates. Cost of debt: 12.9%
Terminal g: 5.50%
EPS: J.P. Morgan vs. consensus
Rp per share J. P. Morgan Consensus Our PT of Rp2,600 represents 17.3x FY11E P/E. Risks
118.8 are: (1) Potential placement by financial investors;
FY10E 109.2
174.8 which could be a buying opportunity in our view as it
FY11E 142.5 would create only technical and temporary pressure on
217.2
FY12E 137.9 the share price. (2) Concentration of production &
product. (3) Potential diversification into power could
change investors view of the company and its share
Source: Bloomberg, J.P. Morgan estimates. price.

2
Stevanus Juanda Asia Pacific Equity Research
(62-21) 5291 8574 31 August 2010
stevanus.x.juanda@jpmorgan.com

Table 1: ADRO - Volume, ASP & Cost

MM tons, US$/ton
1H10 1H09 Y/Y (%) 2Q10 2Q09 Y/Y (%) Q/Q (%) 1Q10 1Q09 Y/Y (%) Q/Q (%)
Production Volume (MM tons) 21.62 17.99 20.2% 10.26 8.96 14.5% -9.7% 11.36 9.03 25.8% -6.3%
Sales Volume (MM tons) 21.75 17.83 22.0% 10.29 9.1 13.1% -10.2% 11.46 8.73 31.3% -8.0%
ASP (US$/ton) 60.0 65.4 -8.3% 60.8 66.3 -8.3% 2.8% 59.2 64.4 -8.1% 0.7%
Total cost (US$/ton) 42.4 40.0 5.9% 44.8 41.1 9.1% 11.7% 40.1 38.9 3.1% 0.8%
ASP (Rp000/ton) 551 723 -23.8% 554 699 -20.7% 1.2% 548 748 -26.8% -1.5%
Total cost (Rp000/ton) 389 443 -12.1% 409 433 -5.6% 9.9% 372 453 -17.9% -1.4%
Source: Company reports and J.P. Morgan calculations.

Table 2: ADRO - 1H10 and 2Q10 results analysis

Rp B, %
In Rp B 1H10 1H09 Y/Y (%) 2Q10 2Q09 Y/Y (%) Q/Q (%) 1Q10 1Q09 Y/Y (%) Q/Q (%)
Revenue 11,985 12,897 -7.1% 5,706 6,364 -10.3% -9.1% 6,279 6,533 -3.9% -9.3%
COGS (8,038) (7,452) 7.9% (4,005) (3,749) 6.8% -0.7% (4,033) (3,704) 8.9% -6.2%
Gross Profit 3,947 5,444 -27.5% 1,701 2,615 -35.0% -24.3% 2,246 2,829 -20.6% -14.4%

Selling and marketing (167) (320) -47.9% (78) (23) 235.3% -11.2% (88) (297) -70.2% -2.0%
General and Administration (210) (193) 8.8% (109) (107) 1.8% 8.2% (101) (86) 17.5% -43.8%
Total Operating Expenses (377) (514) -26.6% (188) (131) 43.6% -0.9% (189) (383) -50.6% -29.9%
Operating Income 3,570 4,931 -27.6% 1,513 2,484 -39.1% -26.4% 2,057 2,446 -15.9% -12.6%

Interest Expenses (586) (365) 60.6% (326) (199) 63.6% 25.2% (260) (166) 57.0% -28.4%
Interest Income 25 29 -14.0% 11 17 -37.6% -23.4% 14 12 21.0% -26.3%
Gain (Loss) on Asset Disposal (14) (0) 85968.8% (14) 0 -338800.0% 5975.3% (0) (0) 1015.0% -96.6%
Forex gain (loss) (121) 0 -41694.9% (127) 19 -786.1% -2278.7% 6 (18) -132.0% -84.1%
Goodwill Amortization (245) (261) -6.0% (124) (138) -10.7% 1.6% (122) (122) -0.7% -0.3%
Others (91) 24 -475.8% (97) 7 -1573.8% -1716.1% 6 18 -66.0% -105.3%
Total Other Income (expenses) (1,033) (572) 80.5% (677) (295) 129.4% 90.0% (356) (277) 28.4% -35.3%
Profit before tax 2,537 4,359 -41.8% 837 2,190 -61.8% -50.8% 1,700 2,169 -21.6% -5.7%
Income tax expenses (1,379) (2,052) -32.8% (546) (1,032) -47.0% -34.4% (833) (1,020) -18.4% -11.3%

Extraordinary items - - NA - - NA NA - - NA NA
Preacquisition income - (10) -100.0% - (10) -100.0% NA - - NA -100.0%
Minority Interest (5) (49) -89.8% 2 (45) -103.4% -123.8% (6) (3) 89.0% -127.5%
Net Income 1,153 2,249 -48.7% 292 1,103 -73.5% -66.1% 861 1,145 -24.8% 1.0%
EPS 36 70 -48.8% 9 34 -73.6% -66.2% 27 36 -24.9% 0.9%
Source: Company reports and J.P. Morgan calculations.

3
Stevanus Juanda Asia Pacific Equity Research
(62-21) 5291 8574 31 August 2010
stevanus.x.juanda@jpmorgan.com

Table 3: ADRO - 1H10 and 2Q10 margin analysis

%, bp
Margin 1H10 1H09 Y/Y 2Q10 2Q09 Y/Y Q/Q 1Q10 1Q09 Y/Y Q/Q
(bp) (bp) (bp) (bp) (bp)
Revenue 100.0 100.0 - 100.0 100.0 - - 100.0 100.0 - -
COGS (67.1) (57.8) (928) (70.2) (58.9) (1,128.5) (595.9) (64.2) (56.7) (754) (211)
Gross Profit 32.9 42.2 (928) 29.8 41.1 (1,128.5) (595.9) 35.8 43.3 (754) (211)
Selling and marketing (1.4) (2.5) 109 (1.4) (0.4) (100.7) 3.2 (1.4) (4.5) 314 (11)
General and Administration (1.8) (1.5) (26) (1.9) (1.7) (22.8) (30.6) (1.6) (1.3) (29) 99
Total Operating Expenses (3.1) (4.0) 84 (3.3) (2.1) (123.5) (27.4) (3.0) (5.9) 285 88
Operating Income 29.8 38.2 (845) 26.5 39.0 (1,252.0) (623.3) 32.8 37.4 (469) (122)
Interest Expenses (4.9) (2.8) (206) (5.7) (3.1) (258.0) (156.3) (4.1) (2.5) (161) 110
Interest Income 0.2 0.2 (2) 0.2 0.3 (8.2) (3.5) 0.2 0.2 5 (5)
Gain (Loss) on Asset Disposal (0.1) (0.0) (11) (0.2) 0.0 (23.8) (23.4) (0.0) (0.0) (0) 9
Forex gain (loss) (1.0) 0.0 (102) (2.2) 0.3 (252.3) (232.4) 0.1 (0.3) 37 (44)
Goodwill Amortization (2.0) (2.0) (2) (2.2) (2.2) 0.9 (22.8) (1.9) (1.9) (6) (18)
Others (0.8) 0.2 (95) (1.7) 0.1 (180.8) (180.0) 0.1 0.3 (17) 175
Total Other Income (expenses) (8.6) (4.4) (418) (11.9) (4.6) (722.2) (618.5) (5.7) (4.2) (143) 228
Profit before tax 21.2 33.8 (1,263) 14.7 34.4 (1,974.2) (1,241.7) 27.1 33.2 (612) 105
Income tax expenses (11.5) (15.9) 440 (9.6) (16.2) 663.4 369.0 (13.3) (15.6) 235 30
Extraordinary items - - - - - - - - - - -
Preacquisition income - (0.1) 7 - (0.2) 15.1 - - - - 49
Minority Interest (0.0) (0.4) 33 0.0 (0.7) 73.5 13.0 (0.1) (0.1) (5) (44)
Net Income 9.6 17.4 (782) 5.1 17.3 (1,222.1) (859.8) 13.7 17.5 (382) 140
Source: Company reports and J.P. Morgan calculations.

Table 4: ADRO - 1H10 and 2Q10 in US$

US$MM, %
1H10 1H09 Y/Y (%) 2Q10 2Q09 Y/Y (%) Q/Q (%) 1Q10 1Q09 Y/Y (%) Q/Q (%)
Exchange Rate 9,189 11,067 -17.0% 9,116 10,542 -13.5% -1.6% 9,262 11,621 -20.3% -2.2%
Results in USD 1H10 1H09 Y/Y (%) 2Q10 2Q09 Y/Y (%) Q/Q (%) 1Q10 1Q09 Y/Y (%) Q/Q (%)
Revenue 1,304.3 1,165.3 11.9% 625.9 603.7 3.7% -7.7% 677.9 562.2 20.6% -7.3%
COGS (874.8) (673.4) 29.9% (439.3) (355.6) 23.5% 0.9% (435.5) (318.7) 36.6% -4.2%
Gross Profit 429.5 492.0 -12.7% 186.6 248.1 -24.8% -23.1% 242.5 243.5 -0.4% -12.5%
Total Operating Expenses (41.0) (46.4) -11.6% (20.6) (12.4) 66.0% 0.7% (20.4) (32.9) -38.0% -28.3%
Operating Income 388.5 445.5 -12.8% 166.0 235.7 -29.6% -25.2% 222.0 210.5 5.5% -10.7%
Interest Expenses (63.8) (33.0) 93.4% (35.7) (18.9) 89.2% 27.2% (28.1) (14.3) 97.0% -26.8%
Interest Income 2.7 2.6 3.5% 1.2 1.6 -27.9% -22.1% 1.5 1.0 51.8% -24.7%
Gain (Loss) on Asset Disp (1.5) (0.0) 103559.0% (1.5) 0.0 -391782.3% 6072.6% (0.0) (0.0) 1299.0% -96.6%
Forex gain (loss) (13.2) 0.0 -50195.8% (14.0) 1.8 -893.4% -2313.6% 0.6 (1.6) -140.1% -83.8%
Goodwill Amortization (26.7) (23.6) 13.2% (13.5) (13.1) 3.3% 3.2% (13.1) (10.5) 24.6% 1.9%
Others (9.9) 2.2 -552.6% (10.7) 0.6 -1804.4% -1742.0% 0.6 1.5 -57.3% -105.4%
Total Other Income (expenses) (112.4) (51.7) 117.3% (74.2) (28.0) 165.3% 93.0% (38.5) (23.9) 61.2% -33.9%
Profit before tax 276.1 393.8 -29.9% 91.8 207.7 -55.8% -50.0% 183.6 186.7 -1.6% -3.6%
Income tax expenses (150.1) (185.4) -19.0% (59.9) (97.9) -38.8% -33.4% (89.9) (87.8) 2.4% -9.4%
Preacquisition income - (0.9) -100.0% - (0.9) -100.0% NA - - NA -100.0%
Minority Interest (0.5) (4.4) -87.8% 0.2 (4.3) -104.0% -124.2% (0.7) (0.3) 137.2% -128.2%
Net Income 125.5 203.2 -38.3% 32.0 104.7 -69.4% -65.6% 93.0 98.6 -5.7% 3.2%
EPS 0.004 0.006 -38.3% 0.001 0.003 -69.5% -65.6% 0.003 0.003 -5.7% 3.1%
Core Net Income 136.0 202.0 -32.7% 40.6 103.4 -60.8% -56.1% 92.3 98.6 -6.4% -1.8%
Source: Company reports and J.P. Morgan calculations

4
Stevanus Juanda Asia Pacific Equity Research
(62-21) 5291 8574 31 August 2010
stevanus.x.juanda@jpmorgan.com

JPM Q-Profile
Adaro Energy (INDONESIA / Energy)
As Of: 27-Aug-2010 Quant_Strategy@jpmorgan.com

Local Share Price Current: 2050.00 12 Mth Forward EPS Current: 167.07
2,500.00 300.00

250.00
2,000.00

200.00
1,500.00
150.00
1,000.00
100.00

500.00
50.00

0.00 0.00
Jul-95

Jul-96

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Jul-98

Jul-99

Jul-00

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Jul-95

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Jul-98

Jul-99

Jul-00

Jul-01

Jul-02

Jul-03

Jul-04

Jul-05

Jul-06

Jul-07

Jul-08

Jul-09

Jul-10
Earnings Yield (& local bond Yield) Current: 8% Implied Value Of Growth* Current: 37.55%
40% 12Mth fwd EY Indonesia BY Proxy 1.20

35% 1.00
0.80
30%
0.60
25% 0.40
20% 0.20

15% 0.00
-0.20
10%
-0.40
5% -0.60
0% -0.80
Jul-95

Jul-96

Jul-97

Jul-98

Jul-99

Jul-00

Jul-01

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Jul-00

Jul-01

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Jul-04

Jul-05

Jul-06

Jul-07

Jul-08

Jul-09

Jul-10
PE (1Yr Forward) Current: 12.3x Price/Book Value Current: 3.6x
25.0x 30.0x PBV hist PBV Forward
25.0x
20.0x
20.0x

15.0x 15.0x

10.0x
10.0x 5.0x

0.0x
5.0x
-5.0x

0.0x -10.0x
Jul-95

Jul-96

Jul-97

Jul-98

Jul-99

Jul-00

Jul-01

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Jul-07

Jul-08

Jul-09

Jul-10
ROE (Trailing) Current: 24.24 Dividend Yield (Trailing) Current: 1.19
45.00 1.6
40.00 1.4
35.00 1.2
30.00
1.0
25.00
0.8
20.00
0.6
15.00
10.00 0.4

5.00 0.2

0.00 0.0
Jul-95

Jul-96

Jul-97

Jul-98

Jul-99

Jul-00

Jul-01

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Jul-03

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Summary
Adaro Energy 7305.17 As Of: 27-Aug-10
INDONESIA 14.75243 SEDOL B3BQFC4 Local Price: 2,050.00
Energy Oil, Gas & Consumable Fuels EPS: 167.07
Latest Min Max Median Average 2 S.D.+ 2 S.D. - % to Min % to Max % to Med % to Avg
12mth Forward PE 12.27x 2.67 16.26 12.03 10.80 19.40 2.20 -78% 33% -2% -12%
P/BV (Trailing) 3.61x 1.11 23.72 3.03 4.24 15.22 -6.74 -69% 557% -16% 17%
Dividend Yield (Trailing) 1.19 0.00 1.38 0.00 0.51 1.67 -0.65 -100% 16% -100% -57%
ROE (Trailing) 24.24 6.98 40.74 24.24 24.57 49.60 -0.46 -71% 68% 0% 1%
Implied Value of Growth 37.5% -0.68 0.58 0.41 0.28 1.01 -0.45 -281% 56% 9% -25%

Source: Bloomberg, Reuters Global Fundamentals, IBES CONSENSUS, J.P. Morgan Calcs * Implied Value Of Growth = (1 - EY/Cost of equity) where cost of equity =Bond Yield + 5.0% (ERP)

5
Stevanus Juanda Asia Pacific Equity Research
(62-21) 5291 8574 31 August 2010
stevanus.x.juanda@jpmorgan.com

Adaro Energy: Summary of Financials

Income Statement Cash flow statement
Rp in billions, year end Dec FY08 FY09 FY10E FY11E FY12E Rp in billions, year end Dec FY08 FY09 FY10E FY11E FY12E

Revenues 18,093 26,938 29,472 36,369 45,029 EBIT 4,212 9,928 8,175 10,238 12,011
% change Y/Y 56.1% 48.9% 9.4% 23.4% 23.8% Depr. & amortization 1,041 917 1,544 1,696 1,849
EBITDA 5,253 10,845 9,719 11,934 13,860 Change in working capital -550 708 1,160 563 1,013
% change Y/Y 102.0% 106.5% -10.4% 22.8% 16.1% Taxes -1626 -4119 -3072 -3933 -4758
EBIT 4,212 9,928 8,175 10,238 12,011 Cash flow from operations 1,085 7,097 7,339 8,523 10,417
% change Y/Y 87.0% 135.7% NM 25.2% 17.3%
EBIT Margin 23.3% 36.9% 27.7% 28.2% 26.7% Capex -1,464 -1,106 -6,092 -2,603 -2,626
Net Interest -568 -848 -1,199 -952 -640 Disposal/(purchase) 6 6 - - -
Earnings before tax 2,925 8,578 6,719 8,789 10,873 Net Interest -568 -848 -1,199 -952 -640
% change Y/Y 208.8% 193.3% -21.7% 30.8% 23.7% Other -9,532 -108 -1,976 1,574 1,993
Tax -1,602 -4,119 -3,072 -3,933 -4,758 Free cash flow 1,085 7,097 7,339 8,523 10,417
as % of EBT 54.8% 48.0% 45.7% 44.8% 43.8%
Net income (reported) 887 4,367 3,607 4,803 6,049 Equity raised/(repaid) 11,847 0 0 0 0
% change Y/Y 902.7% 392.3% -17.4% 33.2% 25.9% Debt raised/(repaid) -244 4,816 -224 -1,898 -2,639
Shares outstanding 31,986 31,986 31,986 31,986 31,986 Other - - - - -
EPS (reported) 27.74 136.54 112.77 150.16 189.12 Dividends paid 0 -266 -1,747 -1,443 -1,921
% change Y/Y 553.5% 392.3% (17.4%) 33.2% 25.9% Beginning cash 832 2,416 11,275 7,898 11,066
Ending cash 2,416 11,275 7,898 11,066 15,259
DPS 0 8 55 45 60

Balance sheet Ratio Analysis

Rp in billions, year end Dec FY08 FY09 FY10E FY11E FY12E Rp in billions, year end Dec FY08 FY09 FY10E FY11E FY12E

Cash and cash equivalents 2,416 11,275 7,898 11,066 15,259 EBITDA margin 29.0% 40.3% 33.0% 32.8% 30.8%
Accounts receivable 2,332 2,882 3,154 3,892 4,818 Operating margin 23.3% 36.9% 27.7% 28.2% 26.7%
Inventories 305 250 274 338 419 Net margin 4.9% 16.2% 12.2% 13.2% 13.4%
Others 1,708 1,429 1,564 1,930 2,389
Current assets 7,857 15,837 12,890 17,225 22,885
Sales per share growth 1.7% 48.9% 9.4% 23.4% 23.8%
LT investments 0 0 2,875 2,228 1,579 Sales growth 56.1% 48.9% 9.4% 23.4% 23.8%
Net fixed assets 16,394 17,207 22,379 23,328 24,155 Net profit growth 902.7% 392.3% -17.4% 33.2% 25.9%
Total Assets 33,720 42,465 46,638 50,864 56,311 EPS growth 553.5% 392.3% (17.4%) 33.2% 25.9%

Liabilities Interest coverage (x) 9.24 12.79 8.11 12.54 21.64

Short-term loans 1,695 2,044 2,398 3,139 1,448
Payables 2,641 2,168 2,747 3,377 4,281 Net debt to equity 51.3% 24.3% 38.3% 10.3% -16.8%
Others 2,386 3,784 4,794 5,894 7,471 Sales/assets 0.75 0.71 0.66 0.75 0.84
Total current liabilities 6,722 7,996 9,939 12,411 13,200 Assets/equity 2.41 2.43 2.42 2.24 2.10
Long-term debt 9,010 13,476 12,899 10,259 9,312 ROE 11.0% 27.8% 19.6% 22.9% 24.5%
Other liabilities 3,961 3,482 4,411 5,423 6,874 ROCE 24.6% 34.4% 24.2% 29.0% 32.6%
Total Liabilities 19,693 24,953 27,248 28,094 29,385
Shareholders' equity 14,009 17,445 19,305 22,665 26,793
BVPS 438 545 604 709 838
Source: Company reports and J.P. Morgan estimates.

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Stevanus Juanda Asia Pacific Equity Research
(62-21) 5291 8574 31 August 2010
stevanus.x.juanda@jpmorgan.com

Analyst Certification:
The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research analysts are primarily
responsible for this report, the research analyst denoted by an AC on the cover or within the document individually certifies, with
respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report
accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research
analysts compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the
research analyst(s) in this report.
Important Disclosures

Client of the Firm: Adaro Energy is or was in the past 12 months a client of JPMSI.

Adaro Energy (ADRO.JK) Price Chart

Date Rating Share Price Price Target

3,510 OW Rp2,600 (Rp) (Rp)
16-Mar-10 OW 1920 2400
2,925 OW Rp3,000 16-Apr-10 OW 2200 3000
21-May-10 OW 1920 2600
OW Rp2,400
2,340

Price(Rp)
1,755

1,170

585

0
Jul Oct Jan Apr Jul Oct Jan Apr Jul
08 08 09 09 09 09 10 10 10

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Initiated coverage Mar 16, 2010. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst
may or may not have covered it over the entire period.
J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

Explanation of Equity Research Ratings and Analyst(s) Coverage Universe:

J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analysts (or the analysts teams) coverage universe.] J.P. Morgan Cazenoves UK Small/Mid-Cap dedicated research
analysts use the same rating categories; however, each stocks expected total return is compared to the expected total return of the FTSE
All Share Index, not to those analysts coverage universe. A list of these analysts is available on request. The analyst or analysts teams
coverage universe is the sector and/or country shown on the cover of each publication. See below for the specific stocks in the certifying
analyst(s) coverage universe.

Coverage Universe: Stevanus Juanda: Adaro Energy (ADRO.JK), Bumi Resources (BUMI.JK), Indofood (INDF.JK),
Kalbe Farma (KLBF.JK), Medco Energi (MEDC.JK), PT Aneka Tambang Tbk (ANTM.JK), PT Indo Tambangraya Megah
(ITMG.JK), PT International Nickel Indonesia (INCO.JK), Perusahaan Gas Negara (PGAS.JK), Tambang Batubara Bukit
Asam (PTBA.JK), Unilever Indonesia Tbk (UNVR.JK)

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Stevanus Juanda Asia Pacific Equity Research
(62-21) 5291 8574 31 August 2010
stevanus.x.juanda@jpmorgan.com

J.P. Morgan Equity Research Ratings Distribution, as of June 30, 2010

Overweight Neutral Underweight
(buy) (hold) (sell)
JPM Global Equity Research Coverage 46% 42% 12%
IB clients* 49% 46% 31%
JPMSI Equity Research Coverage 44% 48% 9%
IB clients* 68% 61% 53%
*Percentage of investment banking clients in each rating category.
For purposes only of NASD/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category.

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Stevanus Juanda Asia Pacific Equity Research
(62-21) 5291 8574 31 August 2010
stevanus.x.juanda@jpmorgan.com

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Stevanus Juanda Asia Pacific Equity Research
(62-21) 5291 8574 31 August 2010
stevanus.x.juanda@jpmorgan.com

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