Indonesia Equity Daily, 12 Apr 2011 Coal - Kim Eng

Adaro (BUY): To distribute Rp20.17 final DPS (yield 0.9%)
􀂃 Adaro proposes to distribute Rp20.17 final DPS in the upcoming AGM on 20 April 2011.

Analyst comment:
􀂃 We recommend BUY on Adaro with target price Rp2,650, (15% upside potential), pegging the stock at 21.7‐14.1x FY11‐12 PER.
􀂃 Taking into account the Rp9.85 interim DPS paid in December 2010, Adaro’s total dividend is Rp30 per share from FY10 earnings or 43% DPR, higher than our expectation.

Bumi Resources (HOLD): Vallar to share swap with Bumi?
􀂃 Bisnis Indonesia daily quoted Daren Morris, founder of Vallar Plc, saying that Vallar plans to raise its stake to 50% in Bumi through a share swap with ratio of 57.7 shares of Bumi for every one share of Vallar. Further, Mr Morris said that Vallar has no intention to buy shares of Bumi from the open market.
􀂃 Separately, Director of Bumi Resources, Dileep Srivastava, said that Bumi will have to pay 5% penalty or US$30m on its plan to speed up payment of US$600m debt to CIC. On the other hand, Mr Srivastava estimates a saving on interest expenses of US$228m from the early payment.

Analyst comment:
􀂃 We recommend HOLD on the stock with target price Rp3,100 (4% downside), pegging the stock at 16.6x‐12.7x FY11‐12 PER.
􀂃 Currently Vallar owns 25% of Bumi through a share swap with Bakrie & Brothers. It is still not clear who the counter party for the share swap would be in order for Vallar to raise ownership to 50%.
􀂃 We understand that currently Bumi has US$366.5m convertible bonds; however, we reckon it is convertible to approximately only 4.8% of current Bumi shares.