Bumi Resources (BUMI IJ) - TP Rp2,600

Stock: Bumi Resources (BUMI IJ) Rating, Price: U-PF, Rp2,600 Market Cap, ADTO: US$5.3b, US$12.9m Event: FY11 results announcement – operationally in line, NPAT 52% below CL, 40% below consensus

Operationally the result was in line with our numbers to EBIT but below consensus. Earnings 52% below our estimate due to higher interest and financing cost.
 BUMI released FY11 accounts after market closed on 30 March. Result is in-line with our estimates to the EBIT line (4% below CL number).
 Production increased 9%, in line with our estimate and costs were also in line (2% above CL).
 ASP increases of 32% due to strong coal prices is consistent with what we’ve seen across our coverage and appreciation in the benchmark price during FY11.
 Total other expenses below the EBIT line were US$526m, ahead of our US$291m estimate. Higher interest and finance expense (US$660.7m in FY11 and 33% ahead of our estimate) was the key difference. During FY11 the company undertook refinancing of the 1st tranche of CIC debt.
 The bull argument for this stock is interest will fall as the company finds cheaper debt, lifting earnings. Due to the frequency at which refinancing has and will occur, any savings are being offset by upfront lenders restructuring fees.
 The company plans to call in their investment in related parties Recapital and receivable in Bukit Mutiara to repay existing debt, which has been the plan for more than 12 months now.
 The company is carrying large capitalized exploration and development (pre-stripping costs) which has increased 31% yoy to US$907m. The total amount is now higher than the total equity base of the company (US$888m).
 BUMI is currently trading at 9.4x of our current 12CL estimate, inline vs peers at 9.5x. However it is likely us (and consensus) will need to revisit FY12 estimates as a result of this large miss.

source: CLSA Indonesia