Reuters: Hot Stocks: STOCKS NEWS INDONESIA-UBS initiates Harum Energy with 'sell'

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STOCKS NEWS INDONESIA-UBS initiates Harum Energy with 'sell' Aug 13th 2012, 04:43 Mon Aug 13, 2012 12:43am EDT UBS started coverage of PT Harum Energy Tbk with a 'sell' rating and a target price of 5,900 rupiah, saying while Harum is the fastest-growing major Indonesian coal producer and outperformed the sector due to production growth, it has low reserve life that could put a cap on its valuation and should not trade materially above its reserve life. "In the event of unexpected coal price momentum fuelled by global policy easing, we believe Harum could outperform the sector based on: 1) superior volume growth; 2) ongoing reserve upgrades; and 3) M&A activity supported by a strong balance sheet," UBS analyst Andreas Bokkenhauser said in a note on Monday. However, besides earnings risk from coal and fuel price volatility as well as production disruptions from torrential rains, Harum's third-generation Coal Contract of Work offers only partial protection from ongoing regulatory risk. The broker said it sees Harum's production growth exceeding the sector average over the next two years as output increases and expects additional production from a third mine. At 11.39 am. (0411 GMT) the miner's shares were down 2.42 percent at 6,050 rupiah while the broader index was down 0.1 percent. 1139 (0439 GMT) (Reporting by Andjarsari Paramaditha) Link this Share this Digg this Email Reprints

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