Bumi Resources: Incorporating new guidance and new coal prices; expect strong 1Q11 - JP Morgan

· Incorporate new coal price and new guidance: We revisit our model on BUMI and incorporate the following adjustments: (1) incorporating the better-than-expected FY10 results; (2) lowering our volume estimate from 70MM tons to 66MM tons, in line with the new guidance; (3) raising our FY11 coal price assumption from US$120/ton to US$124/ton and long-term coal price assumption from US$90/ton to US$95/ton. We believe there could be upside to BUMI's US$77/ton ASP guidance in FY11, given the current high coal price; we forecast an average ASP of US$85/ton; (4) early repayment of CIC loan; (5) incorporating BRMS forecasts; and (6) extending our PT from Dec-11 to June-12.

· Raise FY11 earnings forecast by 5.6% and expect strong 1Q11: The adjustments to our model result in us raising our FY11 EPS forecast by 5.6% as ASP is adjusted upwards by 3.1% and cost is adjusted downwards by 2.6%. Currently, our FY11 net income forecast of US$516MM is 1.2% above the consensus forecast of US$509MM. We expect 1Q11 net income to be US$129MM, up 33% Y/Y and 12% Q/Q.

· Florenceville's cancellation should not deter debt repayment: BUMI announced that Florenceville Financial Ltd has cancelled the purchase of 20% of Gallo Oil due to Yemen’s political situation. There will be no write-off due to this cancellation. The US$290MM cash yet to be received will not deter the US$600MM repayment of CIC loan as BUMI has received a total of US$466MM from Bukit Mutiara (US$250MM), Nusantara Pratama Indah (US$170MM) and Thionville Financier (US$45.5MM); on top of its expected FY11 EBITDA of US$2.2B.

· Maintain OW, extend and raise PT to Rp4,500: We extend our PT time horizon from Dec-11 to June-12. This results in us raising our PT from Rp4,000 to Rp4,500. We expect further purchases by Vallar and Batu Hijau IPO to re-rate the stock to our PT. Risks: Volatility and unfavorable corporate actions.