Corporate Result Flash Bumi Resources - Bahana

4Q10 performance

§ BUMI’s 4Q10 earnings increased 89% q-q to USD116b, bringing full-year net profit to USD311m (+63.4% y-y), some 10% above our projection 19% above consensus estimate.

§ In 4Q10, revenues were up 15.5% q-q while COGS jumped 13.9% q-q translating to gross profit rise of 18.2% q-q. The hike in sales was backed primarily by higher ASP while costs rose significantly on higher stripping ratio and fuel cost. Additionally, opex declined 1.9% q-q due to decrease in general and administration expenses, translating to operating profit of USD320m (+29% q-q).

§ At the operating profit level, the results were also above our and consensus estimates forming about 112-108% of our and consensus estimates respectively.

Outlook
BUMI plans to increase combined production from KPC and Arutmin from 64-65m tons in 2011 to 100-101m tons by 2014. To back this, BUMI is adding capacity over its entire supply chain, from mining to transportation to ship loading. In 2011, BUMI is 15% contracted volume and price, implying substantial upside assuming coal prices remain strong throughout 2011.

Recommendation and valuation
We are looking at upgrading our benchmark price from USD115/ton to USD120/ton, inline with other counters in our coverage. Thus, we expect to increase 2011 earnings by some 13%. As we like BUMI fundamentally and given buoyant coal prices, we reiterate our BUY call on the stock with higher DCF-based target price of IDR4,200/ share (no CG discount).