Banpu's first-quarter earnings will drop due to a malfunctioning winch-brake motor at its Bontang Coal Terminal in Indonesia, which disrupted loading, president Chanin Vongkusolkit said yesterday.

Stock analysts believe the accident will hurt the coal-mining firm's results only for the first quarter, while earnings for the entire year will not be much affected. Several analysts have recommended a "hold" on Banpu stock.

Chanin said the company was assessing the damage and would seek a strategy to boost earnings for the remaining three quarters.

Banpu stock closed unchanged yesterday. In midday trading on Tuesday, it dropped 3.8 per cent before rebounding to end at Bt177, off Bt5 from Monday's close.

On Tuesday, Banpu declared force majeure on deliveries of coal from its Bontang Coal Terminal due to the incapacitated loading boom. The terminal has a loading capacity of 250,000 tonnes per week.

Bontang is Banpu's main port facility in Kalimantan, with throughput capacity of 12.5 million tonnes a year.

Sutthichai Kumworachai, an analyst with Siam City Securities, still recommends a "buy" and long-term holding of Banpu stock with a fair value of Bt196 per share.

He said the worst-case scenario was that Banpu's loading suspension would last for four weeks. That would cut the company's revenue and earnings by Bt1.6 billion and Bt124 million, respectively, representing 4.9 per cent of estimated income of Bt32.7 billion and 2.2 per cent of estimated net profit for this year.

However, if Banpu uses barges to partly load coal, its revenue and net profit would be trimmed by only Bt950 million and Bt72 million, representing only 2.9 per cent and 1.3 per cent of this year's expected revenue and earnings.

KGI Securities (Thailand) said the negative impact on Banpu's earnings could be significant as the delayed volume could be as much as 18 per cent of its first-quarter coal volume. The demurrage charges or barge costs for alternative transportation could also eat into quarterly profit.

Since the delayed volume is only 4.5 per cent of full-year volume and a large part of this delayed volume could be sold over the next few quarters, the impact on full-year earnings should be limited. With contribution from Banpu's BLCP power plant, 2007 net income may drop as little as 1.7 per cent from the Bt5.8 billion forecast by KGI.

"We see any negative share price reaction to the news as an opportunity to accumulate Banpu," the securities firm said in its report maintaining a "neutral" for Banpu.

Asia Credit Securities put a "hold" on Banpu stock with a target price of Bt189 this year, saying the impact on the target price would be minimal at only Bt1 per share.

The securities firm said that although the accident would significantly affect first-quarter earnings, a normal net profit for 2007 was still achievable thanks to the 1.4-megawatt BLCP power plant.

Coal prices are also expected to rise on stronger demand from China and India.

However, Seamico Securities advises "sell" for Banpu, saying the fair value of the firm is Bt175 per share and the current stock price has not fully factored in the delay in coal loading. In the worst-case scenario, the fair value of the company will be lowered to Bt170.

Turning to the recent uproar over environmental pollution at the Map Ta Phut Industrial Estate, Chanin said the two units of the company's BLCP power plant in Map Ta Phut were equipped with high technology and a modern pollution-control system. The pollution released from the two generating units is lower than the maximum permissible.

All parties should try to reach an agreement on which environmental standards Map Ta Phut should use, he said.

Subsidiary Banpu Power has recently signed an agreement with the Laos government to conduct a feasibility study for a 1,800MW lignite power plant.

Banpu is also seeking a partner for the project.

Siriporn Chanjindamanee,

Chalida     Ekvitthayavechnukul

The Nation