Bumi Resources: Expecting historic high ASP in FY11 (BUMI, Rp3,250, Buy, TP : Rp3,665) - Mandiri

􀂄 During the Friday analyst meeting two things attracted our attentions. First is their Q1 2011 ASP which reached US$75-80/ton is nearing its highest ever ASP of US$77/ton. On cash cost, in 2008 they booked the cash cost of US$343.5/ton, while in 2011, they are expecting a cash cost of US$35.0-35.5/ton. Second is their plan to repay US$375mn convertible bond and US$600mn CIC loan. We, however, think, that internal cash flow will be difficult to fund the repayment. Hence other methods need to be applied.

As for CIC loan, which has the option to be repaid in October 2011, market talk about repayment using BRM (Bumi Resources Minerals) 7.4bn shares covert from BUMI’s MCN. Using current price of Rp710/share, the converted shares will be worth US$603mn. As for its US$375mn, other than refinancing, the only route is bondholder converting to shares; please see our Notes below on issuer call. However, current share price of Rp3,250/share is still below conversion price of Rp3,366.9/share. (Notes : CB US$475mn issuer call clause :- Non-callable for 3 years and thereafter callable, in whole or in part, at 100% of the principal amount plus accrued and unpaid interest, if the closing price of the Shares for each of 25 consecutive Trading Days is at least 130% of the Conversion Price)