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Fundamental View
AS OF 02 Dec 2024We expect PT Mineral Industri Indonesia’s (MIND ID) strategic importance and policy role to the Government of Indonesia (GoI) to strengthen in line with the GoI’s downstream push and green energy transition efforts.
We expect MIND ID’s credit metrics to improve meaningfully from FY25 onwards as strong commodity prices (barring coal and nickel), capacity additions, and healthy dividend income from key joint venture PT Freeport Indonesia (PTFI) could offset high capex.
Mining regulatory risk remains a concern, though MIND ID’s large diversified scale of operations could partly limit such risks.
A potential IPO of its aluminium business within the next 3-5 years could boost financial flexibility.
Business Description
AS OF 02 Dec 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 has a current 34% stake in PTVI.
Risk & Catalysts
AS OF 02 Dec 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 02 Dec 2024| IDR bn | FY21 | FY22 | FY23 | LTM 9M23 | LTM 9M24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 52.0% | 44.6% | 41.6% | 41.5% | 38.0% |
| Net Debt to Book Cap | 29.6% | 27.1% | 24.5% | 25.3% | 23.7% |
| Debt/Total Equity | 108.3% | 80.5% | 71.2% | 70.9% | 61.4% |
| Debt/Total Assets | 46.1% | 38.7% | 35.6% | 35.4% | 31.6% |
| Gross Leverage | 4.7x | 3.5x | 7.0x | 6.2x | 6.0x |
| Net Leverage | 2.7x | 2.1x | 4.1x | 3.8x | 3.7x |
| Interest Coverage | 3.2x | 3.9x | 2.2x | 2.3x | 2.2x |
| EBITDA Margin | 21.5% | 19.9% | 12.3% | 12.3% | 11.8% |
CreditSight View Comment
AS OF 02 Dec 2024We lower our recommendation on MIND ID to Market perform from Outperform as its anticipated spread tightening has played out. MIND ID trades 30-35 bp wider than Pertamina and 6-18 bp wider than PLN, which we view as fair given MIND ID’s weaker net leverage, weaker free cash flows, exposure to mining regulatory uncertainties, weaker policy role (albeit strengthening with Indonesia’s downstream focus), and ESG concerns from its high coal exposure. We see an improving FY25 credit outlook as stronger metals prices and healthy dividend income from PTFI could mitigate high capex. Positive longer-term catalysts include further stake acquisitions in PTFI/PTVI and an IPO of the Inalum aluminium business.
Recommendation Reviewed: December 02, 2024
Recommendation Changed: November 06, 2024
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