2Q12 PATMI above our expectations. 2Q12 PATMI was down 39% YoY to US$24m (+66% QoQ) on the back of 0.2% YoY declinein top-line to US$238m (+26% QoQ), further dragged by a 8% YoY increase in cost of sales to US$183m and a 60% YoY increase in tax (though this includes one-off US$4.2m for prior years' taxes) to US$23m. Other gains of US$8.3m in 2Q12 helped offset the decline. Management will hold a results conference call on 31 Jul 12, during which revisions on guidance could be made. We maintain our BUY rating and target price of S$2.00 based on 15.5x FY12 P/E. An interim dividend of US2''/sh has been declared.

Sebuku 1H12 production accounted for 48% of our full year. Sebuku's production was strong in 2Q12, with production up 138% YoY to 672Kt (+30% QoQ). Cash costs were down 23% YoY to US$42.7/tonne (+1% QoQ). With 1H12 production accounting for 48% of our FY12 forecast of 2.5m tonnes, we see strong possibility of Sebuku beating our production forecasts.  

Jembayan cash costs declined 15% QoQ. Jembayan's production was down 12% YoY to 2,069Kt (+43% QoQ). 1H12 production now accounts for 39% of our FY12 estimate. We continue to expect Jembayan to experience sequential ramp up in volumes. What was notable was that Jembayan's cash costs were down 15% QoQ to US$57.6/tonne (-5.2% YoY).

Source: OSK