The Problem with the Tin Market in Indonesia

During our recent site visit to TINS, we uncovered compelling insights about the tin industry, particularly as it relates to the business in Indonesia. While tin mining is relatively straightforward, at least compared to the excavation and processing of other minerals, the sector today faces significant regulatory challenges. Historically, Indonesia has seen widespread unregulated wildcat mining, where individuals or private entities illegally mine tin on their own properties, taking advantage of ambiguous regulations. This issue is critical and needs immediate regulatory attention. More effective regulation could in fact position TINS to capitalize significantly from a more structured market environment.
Looking ahead, the new Government of Indonesia is said to be contemplating a ban on tin exports. Such a policy aims to add value to Indonesia's tin resources, by promoting a local downstream industry, allowing the community to benefit more fully from finished products – rather than simply exporting raw materials. While this proposed move aligns with broader economic development goals, it presents a potential challenge for TINS. Given that 91% of TINS's revenue currently comes from exports, regulation could adversely impact near-term financial performance.

Better Performance than in Legacy Years

In fact, TINS currently presents an intriguing opportunity. Should the govt. successfully clamp down on illegal mining, TINS's market share and performance are likely to surge. Although 3Q24 data has yet to be released, we anticipate positive figures, thanks to stable weather conditions and more efficient refinery operations (compared to last year). Currently, TINS trades at 11.01x, and we feel that TINS could see further upside, if the 9M24 results are favorable and if the new govt. implements beneficial regulatory changes.
Potential downside risks include:
1. Reduced tin consumption, leading to market oversupply
2. Continued failure to successfully curb illegal mining
3. Social factors that might impact production efficiency

TINS - Surfing the Wave

TINS - Surfing the Wave

Elgin Gavriel Liman

PT Timah Tbk

28 October 2024 - 07.00am

TINS - Surfing the Wave

Login to your Research Portal Account to continue reading

Macroeconomy

Economic Report - Reviving loan growth through the labour market

Cyclical

MAPI - A Retail Journey Unfolds

Infrastructure

TLKM - A Transformation Journey