EQUITY RESEARCH

Thursday, 5 June 2008

SHIPPING SECTOR/UPDATE

BUY

Berlian Laju Tanker

Unchange

Price

Rp2,100

Target Price

Rp 2,697
Upgrade

Bloomberg Code
Reuters Code
No. of shares (mn)
Market cap (Rp bn)
(US$ mn)
Weight in JCI (%)
3m Avg. daily T/O (US$ mn)

Sailing over tidal waters

BLTA IJ
BLTA JK
4,157.6
8,731
926.6
0.6
1.3

Price
12 mos Hi/Lo

Greater focus on the chemical transport segment

The acquisition of Chembulk Tankers, for US$ 850 mn, along with the delivery of six additional
chemical tankers this year is tilting the balance of revenues towards the chemical segment. In 1Q08,
chemical transport accounted for some 74% of the total consolidated revenues, or up from only
56% in 1Q07. With global sales of chemicals growing 5.5% annually, driven mainly by Asias rapidly
growing chemical industry, BLTA is well positioned to capitalize on increased chemicals trade
between Asia and the developed West.

(Rp)
2,675/1,200

Core PER 2008F

12 mos Hi/Lo

(x)
17.0/7.6

EV/EBITDA 2008F
12 mos Hi/Lo

(x)
11.3/8.2

Key Financial
Net Gearing, %
ROA, %
ROE, %

08F/09F
241.0/173.1
3.6/5.7
9.5/18.7

Price Relative to JCI

1 mo
3 mos
6 mos
12 mos

Concerns over the level of gearing

With almost 90% of the Chembulk acquisition being financed by bank loans, BLTAs level of net
gearing jumped to 4.4x in 4Q07. However, the NDER dropped to 3.4x in 1Q08, indicating that the
company is on track to reduce its net gearing to less than 2.5x by year-end. Its efforts to deleverage
its balance sheet consist of selling its five older single-hull oil tankers (this should raise some US$
120 mn), the sale-and-leaseback of four of its newly built chemical tankers (the sale of these tankers
should yield around US$ 125 mn by the end of 1H08 when they are completed), and its yet-tobe announced further issuance of convertible bonds or even a possible rights issue.

(%)
-1.8
-1.1
-0.1
-7.5

USD/IDR - YE
2007
2008F

(Rp)
9,400
9,445

Major shareholders
PT Tunggaladhi Baskara
Citibank Singapore
Public

(%)
47.19
20.26
32.55

BLTA (LHS)

Rp

Strong operational performance in 1Q08

Revenues grew a brisk 86% y-o-y, with Chembulk contributing for some 60% of the chemical
transport segment. The operating margin edged up to 32%. Net profits, meanwhile, surged 516%
y-o-y. This, however, stemmed from paper gains arising from the change in the fair value of the
companys convertible bonds and notes payable. Stripping out this gain, the core profit actually
grew by a meager 19% y-o-y. Higher interest expenses (up 245%) were attributable to the slower
pace in bottom line growth.

relative to JCI (RHS)

3,000

10
0

2,500

-10
2,000
-20
1,500

The fleet is still expanding

The company has earmarked up to Rp 581 bn in capex to purchase 23 vessels over the next four
years. Its current order book represents about a quarter of year end 2008 capacity. With the
international regulation (Annex II of MARPOL 73/78) coming into force (requiring edible oils to be
transported by IMO II and III compliant chemical tankers), we believe the market for chemical
transport has good prospects. However, the company has not earmarked any capex for oil tankers,
preferring instead to purchase second hand ships depending on the oil shipment contract taken
by the company. As such, we expect the contribution from oil transport to decline this year as two
oil tankers are sold as part of its deleveraging strategy.

-30

6/2/2008

5/5/2008

4/7/2008

3/10/2008

2/11/2008

1/14/2008

12/17/2007

11/19/2007

9/24/2007

10/22/2007

8/27/2007

7/2/2007

7/30/2007

-40
6/4/2007

1,000

Yoga Prakasa
(62-21) 350 9888 ext.3503
[email protected]
Danareksa research reports are also available
at Reuters Multex, First Call Direct and
Bloomberg

www.danareksa.com

Revenue, Rp bn
Revenue growth, %
Core profit, Rp bn
Core profit growth, %
EPS, Rp
Core EPS, Rp
PER, x
Core PER, x
EV/EBITDA, x
PBV, x
Dividend yield, %

2006

2007

2008F

2009F

2010F

3,074.1
17.5
763.1
5.2
262.7
166.3
8.0
12.6
9.9
3.1
0.9

3,642.2
18.5
754.4
(1.1)
165.5
166.3
12.7
12.6
17.1
2.9
1.7

6,014.1
65.1
722.2
(4.3)
388.6
157.4
5.4
13.3
10.1
1.9
1.0

7,050.3
17.2
1,175.5
62.8
262.8
256.1
8.0
8.2
8.2
1.5
2.3

8,228.4
16.7
1,525.8
29.8
339.6
332.5
6.2
6.3
6.7
1.2
1.6

5 June 2008

DAILY INSIGHTS

The increasing oil price is one of the main risks to the bottom line
Our FY08 core earnings estimate uses a y-t-d average WTI price of US$104 (until 16 May 2009).
Based on our calculations, for every 10% increase in the annual average price of WTI crude
oil, the companys FY08 core earnings decline by 18%.
Recommendation
Due to the high leveraging involved in the acquisition of Chembulk, we think that the full
benefits of the acquisition may not be apparent until after FY08, when the net gearing level
subsides and interest expenses level off. As a result, we forecast FY09 core earnings to grow
63% largely due to lower interest expenses. We are optimistic in regard to the ability of BLTA
to repay its debt and comply with its covenant. As such, we conservatively use a WACC of
16.4% as the base of our DCF derived valuation. Our terminal growth rate assumption is 6.8%.
We arrive at a new TP of Rp 2,697. Our TP implies Core PER09-10 of 10.5-8.1x and EV/EBITDA0910 of 9.3-7.7x. Based on a closing price of Rp 2,075 per share, there is 30% upside to our TP.
BUY

5 June 2008

DAILY INSIGHTS

Focusing on chemical shipment

After its failed attempt to acquire the Spanish-based chemical tanker company Marpetrol,
SA in 2006, BLTA turned its attention to the US-based chemical tanker company, Chembulk
Tankers, LLC and effectively acquired it in December of last year. The acquisition added
another 16 tankers (0.39 mn DWT) to BLTAs fleet of 64 vessels (1.78 mn DWT).
In 1H08, two newbuilt tankers, CB Lindy Alice and CB Kings Point, are to be delivered, with
the last of Chembulks newbuilt tankers, CB Jakarta, to be delivered in January 2009. At
present, BLTA has the third largest chemical tanker fleet in the world with 57 vessels
(including BLTAs newly delivered MT Puspawati) amounting to 900,596 DWT in capacity, up
115% from its pre-acquisition capacity of 418,996 DWT. At the same time, due to Chembulks
relatively younger fleet, the average age of BLTAs chemical tanker fleet post-acquisition is
down to 7.4 years from 9 years. The more modern fleet may benefit BLTA by means of better
rates, and reduced maintenance and insurance costs.
Exhibit 1. The companys fleet has grown 33% CAGR since FY00
Total DWT (LHS)

Growth (RHS)

2,000

140%

1,800

120%

Thousand DWT

1,600
1,400

100%

1,200

80%

1,000
800

60%

600

40%

400

20%

200
-

0%
2000

2001

2002

2003

2004

2005

2006

2007

Source: Company and Danareksa estimates

Chemical transport accounted for 74% of total revenues in 1Q08, or up from 56% in 1Q07.
The shift towards chemical shipment is now more pronounced post-acquisition. Going
forward, the management is upbeat on the outlook for chemical shipment. This is due to
the fairly small global chemical tanker fleet (16 mn DWT) compared to the global oil tanker
fleet (350 mn DWT). The relatively niche segment of chemical seaborne transport therefore
provides more stable rates and more predictable volume.

5 June 2008

DAILY INSIGHTS

Exhibit 2. 1Q07 business segment revenues contribution

Exhibit 3. 1Q08 business segment revenues contribution

Gas, 4.8%

Oil & FPSO,

22.3%

Oil & FPSO,

39.4%

Gas, 3.8%

Chemical,
55.9%

Source: Company

Source: Company

Exhibit 4. World chemical sales, 1996 - 2006

Exhibit 5. Regional shares of world export and imports of chemicals

2006 : 1,641 bn

962 bn

Percentage share
11.5%
32.5%

12.4%
29.0%

27.1%
14.5%

14.4%

25.4%
24.3%
8.9%

Major regions in world chemicals*

1996 :

Chemical,
73.8%

European Union

46.0
21.1
24.0

Asia

14.3
16.0

Nafta
6.2
7.0

Rest of Europe**
Latin America

55.3

1.9
4.0

Africa

0.5
1.0

Oceania

0.7
1.0

0.0
10.0
20.0
30.0
40.0
50.0
60.0
Share in world imports
Share in world exports

EU25

Asia*

Japan

NAFTA

Others

*exclude Japan

* including pharmaceuticals
**Rest of Europe: Switzerland, Norway, and other central & eastern
europe

Source: Cefic

Source: Cefic

With global chemical sales growing 5.5% CAGR (compared to global GDP growth of 3.7%
CAGR), driven mainly by Asias rapidly growing chemical industry, BLTAs move to acquire
Chembulk is complementary to its strategy to capitalize on increased chemicals trade
between Asia and the developed West.

5 June 2008

DAILY INSIGHTS

Exhibit 6. Geographical diversification has resulted from minimal overlapping in route

coverage

Source: Company

Post-acquisition, revenues derived from the Americas should rise to 15.5% from virtually
none, and Europe should contribute 4.9% of total revenue compared to 2.2% preacquisition.
Exhibit 7. Revenues contribution by geographical area
Pre-acquisition

Before

Post-acquisition
After

Europe,
2.20%

Middle East &

India, 17.60%

North Asia
21.90%

Other, 0.30%

Other, 0.20%
Americas,
15.50%

Indonesia,
14.50%

Indonesia,
9.50%

Europe,
4.90%
Southeast
Asia, 33.70%

South east Asia

43.50%

Middle East &

India, 16.70%
North Asia,
19.50%

Source: Company

The Chembulk acquisition should boost operational performance

In the first three months of the year, BLTAs revenues grew 86.4% y-o-y, helped by a more
than twofold increase in sales from the chemical segment. Chembulk accounted for some
60% of the chemical transport contribution. Net profits grew 516% in the first quarter due
to extraordinary gains from a change in the fair value of the convertible bonds and notes
payable. As of the end of 1Q08, the fair value of the companys convertible bond was quoted
at 86.95% or around Rp 1 tn (nominal value of USD 125 mn or some Rp 1.2 tn), while its notes
was quoted at Rp 2.5 tn fair value (nominal value of USD 400 mn or some Rp 3.9 tn). The
companys debt instrument was deeply discounted by the market because of default
concerns due to the companys breach of the net debt to equity ratio (NDER) covenant this
ratio surpassed the 2.5x level at the end of FY07. As such, the change in the fair value was
recorded by the company as non-recurring income in the form of gains through reduced
liabilities.

5 June 2008

DAILY INSIGHTS

Stripping out the impact from the changes in the values of the convertible bonds, then the
core profits grew by a meager 18.7% y-o-y. The slower pace in the bottom line growth was
due to higher interest expenses in 1Q07 (Rp 320.8 bn) than in 1Q06 (Rp 93.1 bn). The 245%
increase in interest expenses was due to the loan taken out by the company to acquire
Chembulk. Net gearing jumped to 3.39x in 1Q08 from 1.34x a year earlier. However, on a
quarterly basis, the net gearing was down from 4.36x in 4Q07.
Exhibit 8. 1Q08 results highlights
3M08
Net revenue, Rp bn
Gross profit, Rp bn
Operating profit, Rp bn
EBITDA, Rp bn
Interest expenses, Rp bn
Net profit, Rp bn
Core profit, Rp bn
Gross margin, %
Operating margin, %
EBITDA margin, %
Net margin, %
Core profit margin, %
Cash, Rp bn
Gross debt, Rp bn
Net debt, Rp bn
Equity, Rp bn
Total Asset, Rp bn
Net gearing, %
Core ROE, %
Core ROA, %

1,568
571
500
737
(321)
1,104
216
36.4
31.9
47.0
70.4
13.8
1,511
16,407
14,897
4,391
21,469
339.2
4.9
1.0

3M07

yoy
%

2008F

A/F
%

1Q08

4Q07

qoq
%

841
306
265
379
(93)
179
182
36.4
31.5
45.1
21.3
21.6

86.4
86.6
88.8
94.3
244.6
515.8
18.7

4,132
1,529
1,296
1,414
(243)
1,088
1,118
37.0
31.4
34.2
26.3
27.1

37.9
37.3
38.6
52.1
132.2
101.5
19.3

1,568
571
500
737
(321)
1,104
216
36.4
31.9
47.0
70.4
13.8

964
237
157
304
(303)
240
257
24.6
16.3
31.5
24.9
26.6

62.7
140.7
219.1
142.8
5.9
360.5
-15.8

789
4,988
4,199
3,146
8,540
133.5
5.8
2.1

91.5
228.9
254.7
39.6
151.4

1,213
5,057
3,845
5,110
10,733
75.2
21.9
10.4

124.6
324.4
387.5
85.9
200.0

1,511
16,407
14,897
4,391
21,469
339.2
4.9
1.0

1,980
16,442
14,462
3,316
20,669
436.2
7.7
1.2

-23.7
-0.2
3.0
32.4
3.9

Source: Company and Danareksa estimates

.

Exhibit 9. Segment contribution (Rp bn)

12M06

12M07

1Q07

2Q07

3Q07

4Q07

1Q08

1594.94

1997.25
25.2
1414.56
29.2

468.40

477.75
2.0
342.85
28.2

518.56
8.5
390.46
24.7

532.55
2.7
373.86
29.8

1153.53
116.6
754.73
34.6

1333.99
1.2
879.39
34.1

330.34

354.85
7.4
209.14
41.1

379.20
6.9
238.27
37.2

369.65
-2.5
306.66
17.0

348.65
-5.7
205.04
41.2

39.88

84.46
43.1

199.18
34.1
136.91
31.3

50.38
26.3
28.70
43.0

49.74
-1.3
34.41
30.8

59.18
19.0
46.29
21.8

60.10
1.5
35.99
40.1

Total Segment Consolidated

Revenue
3061.03
Growth, %
Direct Cost
1951.49
Gross Margin, %
36.2

3530.43
15.3
2430.86
31.1

838.62

882.98
5.3%
580.68
34.2

947.49
7.3
663.13
30.0

961.38
1.5
726.81
24.4

1562.28
62.5
995.76
36.3

Chemical
Revenue
Growth, %
Direct Cost
Gross Margin, %
Oil & FPSO
Revenue
Growth, %
Direct Cost
Gross Margin, %

1152.44
27.7
1317.61
714.59
45.8

307.39
34.4

199.15
39.7

Gas
Revenue
Growth, %
Direct Cost
Gross Margin, %

148.48

27.51
31.0

534.05
36.3

Source: Company and Danareksa Sekuritas

5 June 2008

DAILY INSIGHTS

Further expansion to continue

BLTA has earmarked up to Rp 581 bn in capex to purchase 23 vessels over the next four years.
In 2008, the company is expecting delivery of five more ships in addition to five more that
have already been delivered. The companys fleet has grown 32.7% CAGR since FY00 (see
Exhibit1). Looking ahead, we expect fleet growth to be more subdued at 10% CAGR over
the next four years. Its current order book represents some 30% of the current fleet capacity.
Exhibit 10. The companys fleet is expected to grow at 10% CAGR until 2011

Thousand DWT

Total DWT (LHS)

Growth (RHS)

3,000

25%

2,500

20%

2,000

15%

1,500
10%

1,000

5%

500
-

0%
2007

2008F

2009F

2010F

2011F

Source: Company and Danareksa estimates

Exhibit 11. The orderbook with delivery schedule for the next four years
No Vessel Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23

MT Gas Lombok
MT Gas Sumbawa
MT Tangguh Sago
MT Pramoni
MT Purbasari
MT Royal Flos
MT Tangguh Hiri
MT Pramesti
MT Subadra
CB Jakarta
MT Hyacinth
MT Gas Karimun
MT Gas Batam
MT Watari
MT Setyaboma
MT Sakuntala
MT Wardani
MT Wilutama
MT Widawati
MT Pitaloka
MT Partawati
MT Gas Bangka
MT Gas Madura

DWT / CBM

Year

Type

9,000
9,000
155,000
19,990
19,900
19,600
155,000
19,990
12,500
19,500
12,500
3,500
3,500
25,100
12,500
12,500
25,100
25,400
25,400
19,990
19,990
5,000
5,000

2008
2008
2008
2008
2008
2008
2009
2009
2009
2009
2010
2010
2010
2010
2011
2011
2011
2011
2011
2011
2011
2011
2011

Gas
Gas
LNG
Chemical
Chemical
Chemical
LNG
Chemical
Chemical
Chemical
Chemical
Gas
Gas
Chemical
Chemical
Chemical
Chemical
Chemical
Chemical
Chemical
Chemical
Gas
Gas

Source: Company

5 June 2008

DAILY INSIGHTS

We have included the fleet contained in the order book in our forecast. We forecast revenues
to grow 18% CAGR on the back of higher capacity and better overall rates in FY08. The
chemical rate is expected to grow at a higher pace than the rates in the other two segments.
Note that Annex II of the International Convention for the Prevention of Pollution from Ships
(MARPOL) - which was adopted in 1973 and later modified in 1978 (MARPOL 73/78) came
into force in January 2007. As a result, all vegetable oils must be transported using IMO
specified chemical tankers with double hulls. And with expected high demand for palm oil
to continue in the near future, coupled with the fact that the chemical transport segment
is a niche segment, BLTA should benefit. We conservatively assume the chemical rate to grow
8% annually in 2009 onward.
Exhibit 12. The 3 year old chemical tanker Chembulk Westport,
32,000 DWT

Exhibit 13. The 6 year old chemical tanker Chembulk Kobe,

19,500 DWT

Source: Chembulk

Source: Chembulk

The oil rate, however, is more volatile, as evident in the companys 4Q07 oil transport
contribution. The management explained that there was a significant drop in the oil tanker
rate in November 2007, even though it did move up momentarily in December 2007. Looking
ahead, volatility is expected to continue in the remainder of 2008 as evidenced in the Baltic
Dirty and Clean Tanker Indexes. The management expects the oil tanker rate for 2008 to
increase by 15% on the back of continued high global demand for oil. Although the
International Maritime Organization (IMO) demands mandatory scrapping by 2010 for oil
tankers older than 25 years, we conservatively forecast oil tanker rates to grow by 5% in 2009
onward. We also expect the oil transport contribution to drop slightly in FY08 due to the
sale of two oil tankers (MT Barunawati and MT Pergiwati) as the company is attempting to
deleverage its balance sheet.

5 June 2008

DAILY INSIGHTS

Exhibit 14. Volatility is high as evidenced in the Baltic Dirty

Tanker index ...

Exhibit 15. ...and the Baltic Clean Tanker index ...

Baltic Clean Tanker Index

Baltic Dirty Tanker Index

2,500

1,600
1,400

2,000

1,200
1,000

1,500

800
600

1,000

400
500

200
May-08

Mar-08

Jan-08

Nov-07

Sep-07

Jul-07

May-07

Jan-07

May-08

Mar-08

Jan-08

Source: Bloomberg

Exhibit 16. with less correlation to the oil price

Baltic Dirty Tanker Index

Baltic Clean Tanker Index

WTI Crude Oil Spot

USD/ barrel

2,500

140
120

2,000

100

1,500

80

1,000

60
40

500

20
May-08

Apr-08

Mar-08

Feb-08

Jan-08

Dec-07

Nov-07

Oct-07

Sep-07

Aug-07

Jul-07

Jun-07

Apr-07

Mar-07

Feb-07

0
Jan-07

0
May-07

Nov-07

Sep-07

Jul-07

May-07

Mar-07

Jan-07

Source: Bloomberg

Mar-07

Source: Bloomberg

The level of gearing is still a concern

To acquire Chembulk, BLTA funded the US$ 850 mn acquisition primarily through bank
loans. A total of US$ 750 mn was funded through bank loans while the rest was from the
companys internal cash. One-third or US$ 250 mn is booked at the BLTA level and unsecured
for the moment (reversion to recourse status of which collateral has to be provided shall
occur should the company fail to repay the debt by 19 June 2008). This bridging loan has
been obtained from a consortium of European banks that includes Fortis, ING, NIBC, and
DnB NOR.
Two-thirds or US$ 500 mn is booked at the Chembulk level and collateralized by Chembulks
vessels. This term loan is split into Facility A (US$ 400 mn amortized over 10 years) and Facility
B (US$ 100 mn amortized over 5 years). All loans related to this acquisition have rates of
interest at LIBOR + 150-155 bps.

5 June 2008

DAILY INSIGHTS

Exhibit 17. The first stage of Chembulk acquisition has been executed
Cash

100,000

BLTA Level
Unsecured recourse debt

250,000

Chembulk Level
First priority mortgage debt (non-recourse)
Second priority mortgage debt (recourse)
Total

400,000
100,000
850,000

Recourse debt
Non-recourse debt

350,000
400,000

Source: Company

However, the level of net gearing rose immediately following the acquisition and triggered
a breach in its Bond 03/2007 covenant regarding the NDER level. The covenant stated that
the NDER level should be below 2.5x. However, in fact, the companys NDER surpassed 4.0x
by the end of FY07. Because of this violation, BLTA was deemed to be in technical default,
and as such its credit ratings were downgraded. Thus, the bond trustee has given the
company until July to reduce its net gearing to 2.5x, else a bondholders general meeting
shall be called for and the company may be given additional terms to provide a return
premium to the bondholders (in this case Bond 03/2007 and Ijarah Sukuk 01/2007 since they
are the ones affected). A return premium as risk compensation for the bondholders may
increase the companys interest expenses. We calculate that a 1% return premium on the
coupon of Bond 03/2007 and Ijarah Sukuk 01/2007 will increase FY08 interest expenses by
0.8% or some Rp 7 bn.
Exhibit 19. NDER is expected to fall below 2.5x on this year
500%

4.5

4.0

450%

4.0

400%
350%

3.5

400%

3.5

Source: Company and Danareksa estimates

1.0

50%

0.5
1Q08

0%
4Q07

2010F

2009F

2008F

2007

2006

2005

2004

2003

2002

2001

2000

0%

100%

3Q07

0.5

1.5

150%

2Q07

100%
50%

1.0

2.0

200%

1Q07

150%

1.5

2.5

250%

4Q06

2.0

3.0

300%

3Q06

2.5

2Q06

300%
250%
200%

350%

1Q06

3.0

Net Gearing

4.5

450%

Interest Coverage

500%

Interest Coverage

Net Gearing

Exhibit 18. On quarterly basis, the NDER declined in 1Q08

Source: Company and Danareksa estimates

10

5 June 2008

DAILY INSIGHTS

In 1Q08, the company managed to reduce its gearing to below 3.5x. This was largely due
to its successful sale of three older single hull oil tankers (MT Bandondari, MT Tribuana, and
MT Triwati) in 2007. The company has sold two more tankers in 1H08, all as part of a threeway strategy to deleverage its balance sheet. The management says it has raised some US$
120 mn from the sale of its assets out of a targeted US$ 136 mn. Meanwhile, the company
is still in the process of selling and leasing back four of its newly built chemical tankers (MT
Puspawati, MT Pramoni, MT Purbasari, and MT Pramesti). The management expects to finalize
this by the end of 1H08.
Exhibit 20. The second stage of deleveraging process is underway
De-leveraging Impact
Sale of older oil tankers (4-5 tankers)
Sale and leaseback (4 x 20k DWT newbuildings)
Convertible bond issue
Subtotal
Potential 2007 CB conversion*
Total

Equity Increase

136,000
125,000
100,000
361,000

100,000

125,000

125,000

486,000

225,000

100,000

Note: * Assumes full conversion

Source: Company

BLTA had initially planned to issue up to Rp 800 bn in new bonds by June to refinance its
maturing Rp 340 bn Bond 02/2003 and its Rp 60 bn Mudharabah Sukuk 01/2003 bond.
However, due to the unfavorable bond market conditions, the company decided to
postpone the issuance until a later date.
We also think that the full benefits of the Chembulk acquisition may not be apparent until
after FY08, when net gearing moves closer to the historical average and the interest expenses
level off.
Increasing oil prices may hit the bottom line
With some 50% of its revenues consisting of time charters and contracts of affreightment
(COA), BLTA is insulated from swings in freight rates. However, more than half (with spot rate
and COA without adjustment clause) are exposed to increasing bunker costs.
As bunker costs constitute some 30% of direct costs, the continuing high oil prices are also
affecting the companys earnings, although some lag does occur. This is because vessels are
using marine fuel-oil (MFO) which requires further distillation and processing from its crude
form. Nevertheless, we attempt to forecast the correlation between the average West Texas
Intermediate (WTI) prices and MFO prices and the impact on FY08 core earnings. Our FY08
core earnings estimate uses a y-t-d average WTI price of US$104 (until 16 May 2009). Based
on our calculations, for every 10% increase in the annual average price of WTI crude oil, the
companys FY08 core earnings decline by 18%.
.

11

5 June 2008

DAILY INSIGHTS

Exhibit 21. Earnings sensitivity to WTI crude oil average prices

Average
Price
(US$/barrel)

FY08
Core Earnings
Rp bn

Change
%

124.9
114.5
104.1
93.7
83.3

457.75
589.99
722.24
854.48
986.72

(36.6)
(18.3)
0.0
18.3
36.6

Average WTI Crude Oil +20%

Average WTI Crude Oil +10%
Average WTI Crude Oil (base case)
Average WTI Crude Oil -10%
Average WTI Crude Oil -20%
Source: Danareksa estimates

Exhibit 22. Bunker costs are in the same trending upcycle as crude oil prices
WTI Crude Oil Spot

Rotterdam 380 Centistoke Bunker Fuel Spot

US$/barrel

US$/metric ton

140

700

120

600

100

500

80

400

60

300

40

200

20

100
May-08

Apr-08

Mar-08

Feb-08

Jan-08

Dec-07

Nov-07

Oct-07

Sep-07

Aug-07

Jul-07

Jun-07

May-07

Apr-07

Mar-07

Feb-07

0
Jan-07

Source: Bloomberg

We assume the WTI annual average price to stabilize at US$ 110 per barrel for 2009 and at
US$ 120 per barrel for 2010. We believe rates for chemical transport can grow higher than
8% CAGR on the back of enforcement of Annex II of MARPOL 73/78. Similarly, the rate for
oil transport may be higher than 5% CAGR due to the IMO regulation for mandatory vessel
scrapping in 2010. However, we conservatively forecast the growth rates for chemical and
oil tanker rates at 8% and 5% respectively in 2009-2010.

12

5 June 2008

DAILY INSIGHTS

Exhibit 23. Assumptions highlight

2008F

2009F

2010F

9,343
9,445

9,596
9,669

9,888
9,870

104

110

120

40
35
29
24
33

42
37
31
25
35

45
39
33
26
36

41
28
21
10

45
30
22
11

48
32
24
12

10

Revenue per unit

Oil tanker, US$ per DWT
Chemical tanker, US$ per DWT
Gas tanker, US$ per CBM

129
483
29

107
553
31

124
598
39

Segment revenue breakdown, %

Oil transport
Chemical transport
Gas transport

23.8
72.0
4.2

19.5
76.2
4.2

19.9
75.5
4.6

Forex (Rp / US$)

Average
Year End
Oil price assumption
Annual WTI average
Rates assumption (USD 000 per day)
Oil tanker
Suezmax / 120-200,000
Aframax / 80-120,000
Panamax / 50-80,000
Product / < 50,000
FPSO
Chemical tanker
Handymax / 30-50,000
Chemical tankers / 10-30,000
Chemical tankers / 6-10,000
Chemical tankers / < 6,000
Gas tanker

Source: Danareksa Research Insitute, Danareksa Sekuritas

Share buyback and warrant conversion

As of 31 March 2008, the company had bought back 8.98% or 0.41 mn of its outstanding
shares at an average price of Rp 1,894 per share. The company does not plan to retire the
treasury shares, but instead plans to use them as a reserve for financing (convertible bond
conversion).
The Convertible Bond 02/2007 is a zero coupon bond maturing in April 2012, and with a
conversion price at Sing$ 0.4965 (or about Rp 2,916). We estimate that BLTA would need at
least 0.38 mn shares to cover the conversion. At the moment, the treasury shares owned by
the company are sufficient to cover the convertible bond conversion. As such, the potential
dilution effect is negligible. Meanwhile, the companys warrants expired in January 2008,
meaning there is no further potential dilution from the warrants.

13

5 June 2008

DAILY INSIGHTS

Exhibit 24. Shareholding structure

PT
Tunggaladhi
Baskara

Citibank
Singapore

General Public

47.19 %

20.26 %

32.55 %

PT Berlian Laju Tanker, Tbk.

Source: IDX

Recommendation
Bank Niaga, as the trustee of Bond 03/2007, has given the company 120 days, starting 17
March 2008, to lower its net gearing to the 2.5x level. As of the end of 1Q08, the company
had lowered its net gearing to 3.4x from 4.4x in 4Q07. We are optimistic in regard to the ability
of BLTA to repay its debt and comply with its covenant. As such, we conservatively use a
WACC of 16.4% as the base for our DCF derived valuation. Our terminal growth rate
assumption is 6.8%. We arrive at a new share TP of Rp 2,697.
Our TP implies Core PER09-10 of 10.5-8.1x and EV/EBITDA09-10 of 9.3-7.7x. Based on a closing
price of Rp 2,075 per share, there is 30% upside to our TP. BUY

Exhibit 25. Changes in assumption and forecast

Rp bn
Revenue
Gross profit
Operating income
EBITDA
Pre-tax income
Net income
Core profit
Gross margin, %
Operating margin, %
EBITDA margin, %
Net profit margin, %
Core profit margin, %

2007

2008F
Previous

Revised

Change
%

3,642.2
1,137.5
898.5
1,414.0
768.5
759.4
754.4

4,132.5
1,529.3
1,295.9
1,962.2
1,095.5
1,087.6
1,118.5

6,014.1
1,913.8
1,535.0
2,156.6
1,805.0
1,783.6
722.2

45.5
25.1
18.5
9.9
64.8
64.0
-35.4

31.2
24.7
38.8
20.8
20.7

37.0
31.4
47.5
26.3
27.1

31.8
25.5
35.9
29.7
12.0

2009F
Previous

Revised

Change
%

4,593.9
1,763.8
1,508.5
2,151.8
1,338.8
1,329.9
1,341.2

7,050.3
2,266.2
1,823.3
2,509.0
1,220.7
1,206.3
1,175.5

53.5
28.5
20.9
16.6
-8.8
-9.3
-12.4

38.4
32.8
46.8
28.9
29.2

32.1
25.9
35.6
17.1
16.7

2010F
Previous

Revised

Change
%

4,782.8
1,777.6
1,511.8
2,214.5
1,385.1
1,375.9
1,391.0

8,228.4
2,663.4
2,147.6
2,953.3
1,577.2
1,558.6
1,525.8

72.0
49.8
42.1
33.4
13.9
13.3
9.7

37.2
31.6
46.3
28.8
29.1

32.4
26.1
35.9
18.9
18.5

Source: Company and Danareksa estimates

14

5 June 2008

DAILY INSIGHTS

Exhibit 26. Historical PE Band

Exhibit 27. Historical EV/EBITDA Band

26,675
7.2x

2,023

11.7x
10.6x
9.5x
8.4x
7.3x
6.2x

21,675

5.9x

1,523

4.6x
1,023
523

3.2x

11,675

1.9x

6,675

0.6x

23
01

02

03

04

05

06

07

16,675

1,675
01

08

Source: Bloomberg and Danareksa Sekuritas

02

03

04

05

06

07

08

Source: Bloomberg and Danareksa Sekuritas

Exhibit 26. Projected income statement

Y/e Dec, Rp bn

2006A

2007A

2007PF*

2008F

2009F

2010F

3,074.1
(1,951.5)
1,122.6
(175.9)
946.7
445.8
(178.1)
1,214.4
(8.8)
0.0
1,205.6
763.1
82.3

3,642.2
(2,504.7)
1,137.5
(239.0)
898.5
383.9
(513.9)
768.5
(9.1)
0.0
759.4
754.4
149.8

5,263.3
(3,430.6)
1,832.7
(334.0)
1,498.8
(63.7)
(666.6)
768.5
(9.1)
0.0
832.2
1,481.0
149.8

6,014.1
(4,100.3)
1,913.8
(378.8)
1,535.0
1,074.1
(804.1)
1,805.0
(21.4)
0.0
1,783.6
722.2
94.4

7,050.3
(4,784.1)
2,266.2
(442.9)
1,823.3
31.1
(633.6)
1,220.7
(14.5)
0.0
1,206.3
1,175.5
221.6

8,228.4
(5,565.0)
2,663.4
(515.8)
2,147.6
33.2
(603.5)
1,577.2
(18.7)
0.0
1,558.6
1,525.8
149.9

Y/e Dec, Rp bn

2006A

2007A

2008F

2009F

2010F

Cash
Receivables
Inventories
Others
Totl current assets
Property & vessel
Other assets

886.1
507.0
58.9
520.5
1,972.5
5,903.9
329.5

1,980.4
713.4
118.9
811.9
3,624.6
15,810.7
1,233.3

1,512.0
1,036.6
131.0
904.2
3,583.7
15,173.1
1,218.3

2,276.4
1,215.2
156.5
939.2
4,587.3
15,043.3
1,203.3

2,361.4
1,418.2
182.7
979.0
4,941.2
15,909.6
1,188.3

Account payable
Short term debt
Others
Totl curr. liabs
Long term debt
Other long-term

88.8
926.1
271.5
1,286.5
3,621.0
167.3

142.6
4,567.1
489.1
5,198.8
11,875.0
279.2

244.3
2,079.5
694.8
3,018.6
11,623.3
234.9

292.0
2,100.3
799.1
3,191.4
11,053.8
225.3

340.7
2,029.8
915.8
3,286.2
10,565.7
215.1

259.8
524.8

259.9
533.0

286.8
570.7

286.8
570.7

286.8
570.7

2,346.5
3,131.2
3,661.1
7,678.3
477.1

2,522.6
3,315.6
14,461.7
19,757.7
689.7

4,200.8
5,058.3
12,190.8
18,761.1
923.2

5,425.9
6,283.4
10,877.7
19,437.5
1,079.7

7,034.6
7,892.0
10,234.1
20,487.5
1,260.2

Operating revenue
Direct expenses
Gross profit
Operating expenses
Operating profit
Other income/ expenses
Net interest
Pre-tax income
Taxes
Minority interest
Net Profit
Core Profit
Dividen
* Note: Pro forma

Source: Company and Danareksa estimates

Exhibit 27. Projected balance sheet

Share capital
Excess paid in
Retained earnings & others
Total equity
Net debt
Total capital employed
Wkg cap (inv+dtrs-crtrs)
Source: Company and Danareksa estimates

15

5 June 2008

DAILY INSIGHTS

Exhibit 28. Projected cash flows

Y/e Dec, Rp bn

2006A

2007A

2008F

2009F

2010F

2,823.2
(1,885.4)
(320.2)
(8.9)
(8.9)

3,519.7
(2,418.2)
(388.9)
(14.0)
(9.1)

5,691.0
(3,652.0)
(915.0)
(24.3)
(21.4)

6,871.7
(4,458.4)
(788.6)
(20.6)
(14.5)

8,025.3
(5,183.1)
(759.7)
(20.6)
(18.7)

2.0
601.9

0.0
689.5

(2.6)
1,075.8

73.5
1,663.1

74.2
2,117.4

661.6
(1,125.7)
(464.1)

(7,158.3)
(2,513.7)
(9,671.9)

1,105.1
110.9
1,216.0

(512.4)
155.0
(357.5)

(1,648.2)
156.2
(1,492.0)

Changes in bank loan

Changes in bond payable
Dividend paid
Others
Net Financing Cash Flow

43.7
0.0
(89.1)
(246.3)
(291.7)

5,036.9
5,754.4
(159.5)
(555.1)
10,076.7

(2,705.2)
(4.0)
(94.4)
44.1
(2,759.4)

(334.2)
23.2
(221.6)
(7.6)
(540.2)

(396.3)
14.7
(149.9)
(9.2)
(540.8)

Net changes
Cash at beginning
Cash at end

(153.9)
1,040.0
886.1

1,094.3
886.1
1,980.4

(468.5)
1,980.4
1,512.0

764.5
1,512.0
2,276.4

84.9
2,276.4
2,361.4

Cash receipt from customer

Cash paid to supplier
Interest paid
Profit sharing paid
Income tax paid
Others
Net Operating Cash Flow
Capex
Others
Net Investing Cash Flow

Source: Company and Danareksa estimates

16

5 June 2008

DAILY INSIGHTS

Share price and Recommendation

Date
Rec.
Price target, Rp

10-Oct-06
BUY
2,650

14-Nov-06
BUY
2,650

7-Dec-06
BUY
2,390

21-Mar-07
BUY
2,270

4-Jun-08
BUY
2,697

3,000
2,800
2,600
2,400
2,200
2,000
1,800
1,600
1,400

6/2/2008

5/19/2008

5/5/2008

4/21/2008

4/7/2008

3/24/2008

3/10/2008

2/25/2008

2/11/2008

1/28/2008

1/14/2008

12/31/2007

12/17/2007

12/3/2007

11/19/2007

11/5/2007

10/22/2007

10/8/2007

9/24/2007

9/10/2007

8/27/2007

8/13/2007

7/30/2007

7/16/2007

7/2/2007

6/18/2007

1,000

6/4/2007

1,200

DISCLAIMER
The information contained in this report has been taken from sources which we deem reliable. However, none of P.T. Danareksa Sekuritas and/or its affiliated companies and/or their respective employees
and/or agents makes any representation or warranty (express or implied) or accepts any responsibility or liability as to, or in relation to, the accuracy or completeness of the information and opinions
contained in this report or as to any information contained in this report or any other such information or opinions remaining unchanged after the issue thereof.
We expressly disclaim any responsibility or liability (express or implied) of P.T. Danareksa Sekuritas, its affiliated companies and their respective employees and agents whatsoever and howsoever arising
(including, without limitation for any claims, proceedings, action , suits, losses, expenses, damages or costs) which may be brought against or suffered by any person as a results of acting in reliance upon
the whole or any part of the contents of this report and neither P.T. Danareksa Sekuritas, its affiliated companies or their respective employees or agents accepts liability for any errors, omissions or misstatements, negligent or otherwise, in the report and any liability in respect of the report or any inaccuracy therein or omission therefrom which might otherwise arise is hereby expresses disclaimed.
The information contained in this report is not be taken as any recommendation made by P.T. Danareksa Sekuritas or any other person to enter into any agreement with regard to any investment mentioned
in this document. This report is prepared for general circulation. It does not have regards to the specific person who may receive this report. In considering any investments you should make your own
independent assessment and seek your own professional financial and legal advice.

17