"More than meets the eye. The US$1.9bn investmen"
Yg minjemin US apa CIC/China ?
"Mohon Maaf Lahir dan Batin"
-----Original Message-----
From: "CUMI.JK (Buy, TP 5000)" <cumie...@gmail.com>
Date: Sat, 26 Sep 2009 07:46:29
To: <obrolan-bandar@yahoogroups.com>
Subject: [ob] BUMI: More than meets the eye (Mandirisek)
---------- Forwarded message
Importance: High
Sector:Energy
More than meets the eye
Bumi announced Wednesday that China Investment Corporation ("CIC") has
invested US$1.9bn in Bumi in the form of a debt-like instrument. The
investment will be paid with a 12% annual cash coupon with a total IRR of
19%, the balance payable at the time of final maturities. There are no
details on how it arrived at IRR of 19%, however, we think this has
equity-linked sweetener, with a guaranteed return. If Bumi does not nee d to
pay the balance, the deal is relatively acceptable, giving the current
global financial market condition. The question would be the use of the
loan, and whether it will quickly result in a significant increase to the
bottom line. In the short term it will burden Bumi's P&L. We currently have
a Buy rating with Rp4,000 target price.
More than meets the eye. The US$1.9bn investment consists of US$600mn
repayable in year 4, US$600mn in year 5, and the remaining US$700mn in year
6. The fund will be used for debt restructuring and capital expenditure.
What was interesting was the statement referring to: (1) debt-like
instrument, (2) IRR of 19%, and (3) the balance payable at the time of final
maturities. Our calculation showed an IRR of just 14% (assuming a flat 12%
annual cou pon payment over 6 years), and therefore we think there are
details to follow. Our exercise showed a balance of US$1bn to be paid by
year 6, in addition to US$700mn principal payment to meet the required 19%
IRR.
How quick will its deployment be. Bumi currently has around US$1,556mn and
Rp706bn loans. The US$ loans were mostly priced at LIBOR+2.5-3.0%, with
US$207mn at LIBOR+10.0% and US$103mn at 0%. The repayments of these debts
mean higher interest costs (albeit with longer maturities). As for
investment, the quickest yield will be for Newmont acquisition and/or
upgrade of KPC and Arutmin mines.
It's an expensive deal, more details urged. Based on existing information
the deal is expensive and detrimental to shareholders. More clarifications
are needed. We have not put in any adjustments from the recent US$375mn
convertible bonds and current US$1.9bn loan on lack of details for the use
of the proceeds. We also did not either put non-organic growth from new
investments in our earnings estimates. We currently have a Buy
recommendation for BUMI with Rp4,000/share target price. At Rp3,375/share,
BUMI is trading at 15.4x and 13.7x, PE09F and PE10F, respectively, with
EV/EBITDA of 8.1x and 7.4x, for 09F and 10F.
Ari Pitoyo
+6221 5296 9542
ari.pit...@mandirisek.co.id
Plaza Mandiri 28th floor
Phone: +62 21 526 3445
Fax: +62 21 527 5711
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