Only way is up after tough 1Q
SAR reported 1Q12 results after market on Monday, with NPAT of US$14.5m (-65% YoY) due to softer production (1.45mt, -40% YoY) and higher cash costs (+40% YoY) at Jembayan. A combination of the 4Q11 Mahakam bridge collapse and rainfall led to soft production, before management sped up opening new Jembayan pits in 1Q.

Whilst 1Q results are clearly weak, MER sees the potential for a rebound due to increasing production, lower production costs, and hopefully rallying coal prices. MER maintain Outperform call whilst flagging ~10-15% downside risk to MER’s 2012 earnings estimate when incorporating lower Average Selling Price (ASP) and slightly higher cash costs which still places it in a 7-7.5x FY12E PER.

Restructure of Jembayan mine completed ahead of expectations.
SAR has now opened up both pits which led to production of only 1.45mt and cost increasing to US67.52/t. MER now expects a sharp acceleration in production to around 2.5 - 2.75mt by 4Q12 with costs trending below US$60/t.

Sebuku mine running strongly.
According to MER, the Sebuku production remains strong, with management re-iterating guidance of at least 2.5mt. Cash cost in 1Q12 was higher at US$42.5/t, due mainly to lower production at 519kt (v 800kt in 4Q11), and lower sales from higher inventory. MER expects production to accelerate back to around 1mt for 4Q12, driving cash cost back to around US$35/t.

1Q12 ASP trending above guidance.
A positive surprise was the US$94/t ASP, well above guidance at US$85-90/t. SAR has now fixed prices for 35% of volumes. A number of contracts are now being negotiated following the JFY12 contract of US$115/t. Management is confident of a strong pick up in demand in 2H12 in addition to believing pricing is now at the cost curve.

M&A environment improving.
Management highlighted an improving M&A environment given partly by the uncertainty around recent regulatory changes. Sakari is seeing an increasing number of new opportunities as a result.

US$10m of one-offs.
Management claim that there were US10m in one offs from a prior insurance claim (US$1.5m), dead freight charges (US$3.2m), Domestic Market Obligation costs of US$2.2m and a US$3m derivatives loss (which has now reversed to be a US$5m gain in April).

Singapore Market Wrap

Was it April or is it just May?

Just as markets were looking listless right to the very last day in April, equities in Singapore saw a sudden revival on the first trading day of May. The benchmark STI bounced above the 3,000 level again after a 0.9% day-on-day (dod), closing at 3,006.14

Noble buys natural gas storage site
In notable announcements over the Labour Day holiday, Asia's largest listed commodity supplier Noble Group said that they bought out the entire capacity at EON AG's Holford natural-gas storage site in northern England for five years. Noble will thence have rights to use the site to hold 60mn cubic meters of natural gas. Noble's share price was bought up 3.0% dod to $1.215 yesterday.

Call NobleGrpMBeCW121002 (P8JW) exercise price $1.40.*
Call NobleGrpMBeCW120903 (P1GW) exercise price $1.60.*

Earnings season: CapitaLand
Property giant posted a 31.3% increase in their 1Q12 net profit to $133.2mn. The figure was below the $149.4mn average of analyst estimates compiled by Bloomberg. Nevertheless, CapitaLand's stock price rose 1.0% dod to $2.97 yesterday, in line with the broad market's move.

Call CapitalaMBeCW120904 (QC5W) exercise price $3.00.*
Put CapitalaMBePW121004 (P5OW) exercise price $3.00.*

Overnight Market Wrap

Employment Report Disappoints

The S&P500 ended 0.3% lower yesterday at 1,402.31 as report showed that private payrolls added only 119,000 jobs compared to the analysts forecast of 170,000 increase. Meanwhile, Eurozone unemployment rate rose to a record 10.9% in March, the 11th consecutive monthly increase.

Crude oil gave back some of its Tuesday's gains after data showed that US stockpiles rose to the highest level in 21 years. Nymex crude price fell 0.9% to $105.22 per barrel.

Overnight Markets

Indices	Last	Change
STI	3006.14	0.9%
HSI	21309.08	1.0%
DJIA	13268.57	-0.1%
S&P 500	1402.31	-0.3%
Nasdaq	3059.85	0.3%

Corporate News

Corporate Announcements

Results Announcement
Tue 8 May: Cosco 1Q12
Wed 9 May: UOB 1Q12, SembMarine 1Q12, Ezion 1Q12
Thu 10 May: Wilmar 1Q12, SingTel 4Q12, Genting Singapore 1Q12, Noble Group 1Q12
Fri 11 May: OCBC 1Q12, Golden Agri 1Q12
Mon 14 May: STX OSV 1Q12

Ex-Dividend Date
Fri 4 May: Wilmar ($0.031), IndoFood Agri ($0.003)
Mon 7 May: UOB ($0.40), CapitaLand ($0.08)
Wed 9 May: DBS ($0.28), Genting ($0.01)
Thu 17 May: Yangzijiang ($0.055)