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Reprieve for traders despite court order

Coal traders Asia Green Energy and Unique Mining Services will likely escape hardships from the court order to stop coal transportation in Samut Sakhon due to their spare storage space but sentiment towards their stock prices could soften, according to brokerages.

Recently, the Central Administrative Court issued an injunction against coal-related operations, including transport and storage in Tambon Tha Sai of Muang Samut Sakhon.

AGE has said it has suspended operations at its Nadee plant after the protests, and has switched to using its ports in other provinces.

UMS reported that although it has halted its Samut Sakhon operations, it has a plant and warehouse in Ayutthaya, which could make up for the lost coal supply and ensure normal delivery to customers.

An analyst at Kiatnakin Securities, after discussion with AGE executives, pointed out that the court order has an effect on the party that was accused by the protest leaders. He was referring to Technique Team (Thailand). The injunction was not relevant to AGE, other coal-related operators and users of coal for a business purpose in the province.

In the short term, the protests will have a psychological impact on the two companies’ stocks, which are trading above their fundamentals, the analyst said. Investors have reacted positively to their rosy outlook from expanding investment in coal mines.

AGE is expected to show positive results in the second half of this year and all of next year, he said, while suggesting a “hold” on the coal trader.

AGE yesterday closed down 1.74 per cent to Bt28.25, while UMS edged up 0.65 per cent to Bt15.40.

However, the protest has caused a delay in the construction of AGE’s port and closed-system warehouse in Samut Sakhon, which was expected to be completed in the second quarter of next year. The company has ceased construction at the request of provincial authorities.

AGE will accelerate a similar project in Ayutthaya to complete it this year, instead of the second quarter of next year.

AGE is still negotiating for mines as planned, with the hope of finalising at least one deal this year. The company will focus on investing in operating mines with monthly production capacity of 50,000-100,000 tonnes.

An analyst from Country Group Securities expects that a freeze of the Samut Sakhon plant will push AGE’s expenses higher to about Bt6 million per quarter, but said that will not hurt its profit much.

Country Group has revised its forecast for AGE’s 2011 income up 54 per cent to Bt4.97 billion, due to expected higher coal sales of 2 million tonnes on the back of higher demand in this country and China. Last year, its coal sales totalled 1.1 million tonnes.

AGE’s sales in China are expected to contribute 30 per cent, or 600,000 tonnes, to its coal sales this year.

Next year, AGE is expected to profit from a cost-cutting plan with the opening of its own port and warehouse in Samut Sakhon and the construction of a closed-system coal grading plant. Country Group expects the coal trader to earn Bt312 million this year and Bt489 million next year.

A Capital Nomura Securities researcher noted that the uncertainty surrounding the restoration of coal operations for AGE and UMS could send their stock prices tumbling.

The brokerage suggests avoiding AGE, UMS and Thoresen Thai Agencies (TTA). TTA is UMS’ major shareholder.

Source: The Nation

 

ThaiVest Editorial Team

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