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Selasa, 14 Juni 2011

BUMI, Show us the money - BoAML

Our take on $2bn bond issue: earnings dilutive, no direct cash
Vallar announced last Friday that it will issue $2bn in CBs at 2% coupon, to BUMI, to buy a 75% stake in Bumi Resources Mineral (BRM). This means: 1) BUMI is not going to receive the cash immediately (unless it sells the CBs immediately) – there is a plan to list the CBs but we doubt it will be 100% - Bakrie and Rothschild could face a massive dilution risk; or, otherwise BUMI has to wait until 2017 to receive Vallar shares (unlikely scenario because we understand it will not be allowed under British law); 2) BUMI will face an earnings dilution. BUMI earned US$236mn in equity via net income of associates (primarily from BRM) in 2010 vs potential coupon receipt of US$40mn.

How much earnings dilution could potentially be?
Assuming no BRM (all BRM shares are transferred to Vallar) in 2010 and no debt repayment, BUMI’s earnings would likely see a reduction of 20%. But on a fullyear basis, the impact on 2012E earnings will be around 13% (as we have assumed declining earnings contribution from NNT). BUMI would trade at 13x 2012E P/E under that scenario. We have kept our earnings estimate mostly unchanged for now.

Raising PO - factoring in US$600mn reduction in CIC loan
Assuming BUMI would successfully reduce US$1.2bn of CIC loan (via CB proceeds) by October 2012 and the CB deals go through, we raise our PO from Rp2900 to Rp3335 based on a target 2012E P/E of 12x. Do note we have valued the rest of Indo coal players with NPV. There is not much upside potential to our PO. We have kept our Neutral rating unchanged.

Not much upside even under the best-case scenario
Assuming BUMI manages to reduce US$1.9bn loan from CIC by end 2011 and the CB deals go through, BUMI would only trade at 9.5x 2012E P/E, which is comparable to SAR and ITMG, without paying for all the uncertainty surrounding BUMI. But we understand only US$600mn of BUMI loan can be repaid by October 2011 but the rest US$1.2bn can only be repaid by October 2012 and 2013.

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