--- On Tue, 1/20/09, patricia.sumamp...@cimb.com <patricia.sumamp...@cimb.com> wrote:
From: patricia.sumamp...@cimb.com <patricia.sumamp...@cimb.com> Subject: BUMI (TP Rp500) - Macquarie: Can't touch this To: Date: Tuesday, January 20, 2009, 9:07 AM Subject: f BUMI (TP Rp500) - Macquarie: Can't touch this Bumi Resources INDONESIA Monday 19 January 2009 BUMI IJ Underperform Stock price as of 16 Jan 09 Rp 540.00 12-month target Rp 500.00 Upside/downside % -7.4 Valuation Rp 2,450.00 - DCF (WACC 13.0%) GICS sector energy Market cap Rp bn 10,478 30-day avg turnover Rp m 225,811.0 Market cap US$m 942 Number shares on issue m 19,404 Investment fundamentals Year end 31 Dec 2007A 2008E 2009E 2010E Total revenue m 2,265.5 3,574.4 3,684.8 3,529.6 EBIT m 388.7 1,154.8 1,203.3 683.6 EBIT Growth % 25.7 197.1 4.2 -43.2 Reported profit m 789.0 635.7 444.9 243.5 Adjusted profit m 281.5 635.7 444.9 243.5 EPS rep ¢ 4.1 3.3 2.3 1.3 EPS rep growth % 285.7 -19.4 -30.0 -45.3 EPS adj ¢ 1.5 3.3 2.3 1.3 EPS adj growth % 27.7 125.8 -30.0 -45.3 PE rep x 1.2 1.5 2.1 3.9 PE adj x 3.3 1.5 2.1 3.9 Total DPS ¢ 0.8 1.0 0.7 0.4 Total div yield % 17.4 20.2 14.2 7.8 ROA % 14.6 31.3 26.7 15.1 ROE % 38.0 49.9 28.1 13.4 EV/EBITDA x 3.4 1.3 1.2 2.0 Net debt/equity % -7.1 34.8 14.4 3.7 Price/book x 0.8 0.7 0.5 0.5 BUMI IJ rel Jakarta Composite Index performance, & rec history Source: Datastream, Macquarie Research, January 2009 (all figures in USD unless noted) Analysts Adam Worthington +62 21 515 7338 adam.worthing...@macquarie.com Albert Saputro +62 21 515 7340 albert.sapu...@macquarie.com Can't touch this Event § We reiterate our Underperform recommendation on Bumi and our target price of Rp500. However, we cut our fair value from Rp3,630 down to Rp2,450 on the back of our global coal price forecast cuts. Impact § Forecast now closer to the cost curve and the end of the downgrade cycle (hopefully). Our global commodities team have significantly cut their thermal coal price forecast for JFY 200911 from US$100105 to US$7075, on the back of a drastic global growth slowdown. § Only 2530% of production priced in 2009, leading to significant earnings risk given potential for coal price volatility. § Recent acquisitions appear expensive The DEWA deal was concluded at an 8x premium to the prevailing market price. Further, FBS was purchased at US$20 EV/Reserves (vs current regional multiples of US$4 EV/Reserves) and the PEB was purchased at US$120m (which is a non-producing mine with low CV coal of 4,8005,200). § and significant questions are raised over transparency. The FBS and PEB deals, in particular, appear to lack transparency as the FBS's office is registered in Bakrie's building, and Bumi's President Director has only recently resigned as a Director of FBS. Further, according to the Indonesian Coal Book, PEB is 90% owned by Bakrie Capital Indonesia. § Risk of future acquisitions to impact free cashflow generation? We highlight the risk of expensive and non-transparent transactions continuing, which could lead to a deterioration of Bumi's future free cashflow (FCF). § DCF valuation does not account for leakages of FCF. Previously, our price target was predominantly based on the NPV of future cashflows from Bumi's world class coal mining assets, KPC and Arutmin. However, we now see the risk of leakages of FCF via acquisitions. We arrive at our target price by applying an 80% discount to an NPV valuation. We acknowledge that this discount is somewhat arbitrary, but this it is appropriate given uncertainty. Earnings revision § We downgrade our earnings by 33% and 65% for 2009/10. Price catalyst § 12-month price target: Rp500.00 based on a DCF methodology. § Catalyst: Change in corporate governance; locking in prices for 2009 production. Action and recommendation § We rate Bumi Underperform with a Rp500 target price due to corporate governance concerns. PDF (245 KB, 4 pages) Disclaimer: The information contained in this e-mail is confidential and has been furnished to you solely for your use. You may not disclose, reproduce or distribute the information in any way. Macquarie does not guarantee the integrity of this e-mail or attached files. Macquarie Capital (USA) Inc. affiliate research reports and affiliate employees are not subject to the disclosure requirements of FINRA rules. Any persons receiving this report directly from Macquarie Capital (USA) Inc. and wishing to effect a transaction in any security described herein should do so with Macquarie Capital (USA) Inc. 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