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Fundamental View
AS OF 07 May 2024PT Mineral Industri Indonesia (MIND ID) is fully owned by the Government of Indonesia (GoI); we believe its state linkages and strategic importance to the GoI will strengthen as the nation continues to pursue the development of its downstream commodities sector and support green transition.
We expect MIND ID’s credit metrics to improve meaningfully over the next 2 years even amid high capex, aided by strong anticipated commodity prices and sales volumes, healthy dividend income from key joint venture PT Freeport Indonesia (PTFI), phased stake acquisitions of PT Vale Indonesia that we see as net credit positive, and a potential IPO of its aluminium business in end-FY24/FY25 that should free up cash.
MIND ID’s large, diversified scale of operations helps limit commodity-specific risks.
Business Description
AS OF 07 May 2024- MIND ID is an unlisted Indonesian state-owned holding company of various Indonesian mining operators.
- Key subsidiaries include: 1) Bukit Asam: Coal mining, processing, and sale of coal; 2) Timah: Tin mining, processing, and sale of downstream products; 3) Aneka Tambang (Antam): Mining, processing, and sale of gold products, nickel, ferronickel, bauxite and chemical grade alumina; 4) Inalum: Production of aluminium.
- Key unconsolidated joint ventures and associates include: 1) PT Freeport Indonesia (PTFI): Mining, processing and sale of copper, gold and silver. MIND ID aims to raise its stake in PTFI to 71% from a current 51% in the medium-to-long term; 2) PT Vale Indonesia (PTVI): Mining and processing of nickel. MIND ID aims to raise its stake in PTVI to >51% from a current 20% by end-2025.
Risk & Catalysts
AS OF 07 May 2024MIND ID is subjected to unanticipated changes in mining policies that raise operational and regulatory uncertainties.
MIND ID is exposed to commodity price fluctuations that could hurt sales price realizations and profitability.
Capex typically remains elevated, pressurizing its free cash flow generation and leverage.
MIND ID faces material asset concentration risk for its coal, gold and tin segments.
Key Metric
AS OF 07 May 2024| IDR bn | FY19 | FY20 | FY21 | FY22 | FY23 |
|---|---|---|---|---|---|
| Debt to Book Cap | 51.6% | 55.9% | 52.0% | 44.6% | 41.6% |
| Net Debt to Book Cap | 37.5% | 39.0% | 29.6% | 27.1% | 24.5% |
| Debt/Total Equity | 1.1x | 1.3x | 1.1x | 0.8x | 0.7x |
| Debt/Total Assets | 46.5% | 51.0% | 46.1% | 38.7% | 35.6% |
| Gross Leverage | 8.6x | 10.8x | 4.7x | 3.5x | 7.0x |
| Net Leverage | 6.3x | 7.5x | 2.7x | 2.1x | 4.1x |
| Interest Coverage | 1.7x | 1.1x | 3.2x | 3.9x | 2.2x |
| EBITDA Margin | 11.0% | 12.9% | 21.5% | 19.9% | 12.3% |
CreditSight View Comment
AS OF 07 May 2024We maintain our Outperform recommendation on MIND ID. MIND ID trades notably wider than Pertamina and PLN, which we view as unjustified considering Indonesia’s EV push (which will strengthen MIND ID’s policy role), stabilized regulatory uncertainties, our expectations of strong commodity prices and downstream demand, and healthy persisting dividend income from PTFI. An IPO of the aluminium business Inalum in end-FY24/FY25 is also credit positive. We anticipate MIND ID’s credit metrics to improve steadily to hit 2.8x-3.0x net leverage by FY25. Thus, we see scope for MIND ID’s bonds to compress further by 15-20 bp.
Recommendation Reviewed: May 07, 2024
Recommendation Changed: February 01, 2024
Who We Recommend
