--- 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)
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