Bumi Resources - Alert: Upbeat Messages from Analyst Meet - Citigroup

The crux of Bumi management's presentation revolves on the company's deleveraging efforts and expansion plans.

The key takeaways from the meeting are:

1. The planned expansion plan to 100m tpa appears to be gaining a lot of momentum. Bumi expects that by the end of 2012, its coal supply chain's capacity would have reached the targeted 100m tpa. The long-planned second conveyor belt is now expected to be completed in end of this year or early next year. The second conveyor belt would double the capacity to 65m tons, helping the company an estimated c.US$2/t vs. truck hauling.

2. Bumi plans to repay US$600m of CIC's debt two years early in Oct 2011. The huge interest savings by the early repayment (US$228m for two years) would well outweigh the US$30m penalty if the debt is repaid in cash. However, Bumi is talking with CIC on potential debt to equity swap in Bumi Resources Mineral and if this is realized then the penalty will be waived.

3. The company maintains its production guidance of 66m tons (+8% y-y) but indicated that this is a minimum as the internal target is higher than this. Bumi also raised its ASP expectation from US$77/t in December 2010 prior to Australian floods to US$80-85/t currently.

4. There would not be any tender offer if Vallar executes its plans to add its stake to 51% in Bumi as Bakrie will remain a controlling shareholder in Bumi.