Targen Price AALI menurut JP-Morgan : 23.599
Subject: Fw: JPM Indo: as bullish as one can get
Newsflow
* Indomobil (IMAS IJ) – Suzuki Motor Corporation will make US$460mn fresh investment to its assembly plant in Bekasi, West Java, to double its capacity from 100k to 200k per year, in 2011. (Bisnis Indo).
* Gajah Tunggal (GJTL) and Multistrada (MASA) – global tyre producers Bridgestone and Goodyear planning to hike prices again by 6.5% in October, after passing through a 6% price increase in August. (Kontan).
* Bumi Resources (BUMI IJ) – investor relations Dileep Srivastava said that the company is maintaining a minimum share price of Rp2366 for its new share issue, book building to close on 30 Sept. (Investor Daily).
* Bakrie Telecom (BTEL IJ) and Telkom (TLKM IJ) – Public relations of KPPU (anti-monopoly body) told the press that Telkom Flexi-Bakrie Tel consolidation does not violate law number 5/1999 regarding monopoly practices. Indonesia’s telecom association (Mastel) offers its professional view that CDMA and GSM operators are effectively direct competitors. (Investor Daily).
* Kageo Igar Jaya (IGAR IJ) – Kingsford Holdings launched a tender offer on the stock at Rp185, full info memo out on the local press. Stock closed at Rp181 yesterday. (Bisnis Indo).
* Hexindo (HEXA IJ) – Itochu Corp increased its stake in Hexa from 22.5% to 25%, buying 21mn shares at Rp5000 (last close Rp5600). (Investor Daily).
* Aneka Tambang (ANTM IJ) – Jinchuan Group of China plans to make US$2bn investment in nickel project in Halmahera, North Maluku, in partnership with ANTM. (Bisnis Indo).
Research Call
Astra Agro Lestari: upgrade from U/W to O/W
Aditya Srinath has upgraded his U/W stance on AALI to O/W. The stock has lagged the JCI by 13% and the Jakarta Agri Index by almost 8%. Reasons to be more positive now:
(1) CPO output in August up y/y for the first time this year: AALI’s CPO Output grew 9% m/m in August, posting a 7% y/y growth and arresting a trend of y/y declines going back to January. Seasonally adjusted monthly harvest data suggests a healthy recovery in output.
(2) Consensus FY10E EPS down 18% in the last quarter: Earnings expectations have declined sharply - In June 2010 JPM FY10E EPS was 23% below consensus, but street revisions have resulted in our forecasts now being slightly higher. With volumes recovering and CPO prices healthy, we believe that the downside to estimates should be arrested in the near term.
https://mm.jpmorgan.com/servlet/PubServlet?skey=R1BTLTQ3NTM2OC0w&Name=GPS-475368-0.pdf
My take -- could be a prelude for Aditya to extend his O/W rating and price target on parent company Astra International, but a rotation into CPO plays may not be a bad idea. Bakrie Plantations (UNSP) is the main laggard in the space with biggest exposure into natural rubber.
Sales Call
Bumi Resources: Bakrie’s back
Against the odds, Moody’s has decided not to downgrade Bumi’s Ba3 bond rating, believing that Bumi will arrange sufficient funding to address its very near term refinancing requirements and that its underlying performance will show gradual improvement. They maintain negative outlook to reflect ongoing refinancing risk at the holdco level over the next 12 months (assuming all puts are exercised), but notes that committed facilities are already in place to cover near term maturities, specifically those in Q4 2010. (Full article below)
My take – looking at the share price action, I won’t be surprised if we see the company announcing details of its non pre-emptive share issue plan sometime this week, including fresh information on the parties who will take-up the shares. We may see further rally in Bakrie group stocks on the back of Bumi addressing its refinancing and deleveraging concerns. Bakrie & Brothers CFO recently disclosed the information that Glencore had purchased US$200mn worth of Bumi shares in the market, suggesting that the stock could be under-owned by institutional investors.
Bumi offers the second most attractive EV/reserves valuation amongst the listed Indo coal stocks, at US$3.46/ton (reserves) and US$0.94/ton (resources), after adjusting for an estimated US$1bn equity value of its minority stake in PT Newmont Nusa Tenggara. Indo Tambang trades on US$15.48 (reserves) and US$2.30 (resources), Adaro trades on US$8.16 (reserves) and US$1.72 (resources), Indika on US$6.93 (reserves) and US$2.13 (resources), while PT Bukit Asam on US$2.13 (reserves) and US$0.45 (resources). BUY.
Rizz note: IDR could touch 8,000/USD sometime next year
* Investors and analysts, expecting that Bank Indonesia will meaningfully hike its benchmark rate to keep the Indonesian economy in balance over the next 6-12 months, will be disappointed as the central bank is likely to opt for a gradual IDR appreciation as its monetary tightening tool.
* At the personal level, I believe IDR could touch 8,000/USD sometime next year as Bank Indonesia will be constrained by its balance sheet to continue its sterilization activities at this current pace.
* While I still like Bank Danamon (BDMN), Astra International (ASII), and Semen Gresik (SMGR) on the back of relatively stable interest rates and stronger currency, resulting in rising purchasing power among the “haves” as well as blue collar workers in the non-tradable manufacturing sectors, as these stocks have relatively outperformed the market MTD, I will switch my attention more on Unilever Indonesia (UNVR), Holchim Indonesia (SMCB), and Alam Sutera (ASRI). I stop chasing Ramayana Lestari (RALS) as the stock has not reacted well to its Hari Raya sales.
As part of my national service, your Jakarta-based observer was summoned and asked by Bank Indonesia’s economic and monetary research department yesterday afternoon to provide inputs on one of topics (please refer to the subject of this e-mail), which will be discussed by the central bank’s Board of Governor in its upcoming October monthly meeting. Below are my impressions on how Bank Indonesia looks at the dynamic of the country’s Balance of Payment (BoP), having had a full three hours debate with its senior economists and analysts:
* First, I sense that the central bank is getting nervous about its FX sterilization cost. Umar Juoro, one of members of Bank Indonesia’s supervisory board, told me over the weekend that the sterilization cost begins to meaningfully erode the bank’s capital. Some of these senior economists and analysts were shocked when I said that there is more than 50% likelihood the net portfolio investment flow next year will exceed US$5 billion (their base case scenario, vs. the estimated US$10-12 billion net portfolio inflow during the current year).
* Second, compared to two months ago, more senior economists and analysts in Bank Indonesia believe that the gradual appreciation of IDR is a better monetary tightening tool vis-à-vis raising the benchmark rate. It is an encouraging to learn that these deep
thinkers start to analyze whether job creations in non-tradable manufacturing sectors could offset job losses in tradable manufacturing sectors, resulting from the strengthening of IDR.
* Third, Bank Indonesia admitted that its existing 2011’s current account surplus estimate of US$3-4 billion is too optimistic and is likely to revise it down to US$0-1 billion deficit. That said, what caught me by surprise is the downward revision is mainly caused by significantly higher oil deficit, instead of the weakening of exports due to stronger currency assumption. Pertamina (the state-owned oil and gas company) was apparently asked by PLN (the state-owned electricity company) to import higher than usual diesel oil during 1H10 as PLN could not get enough coal from domestic producers to fire up its coal fired power plants. I inform these senior economists and analysts that, thanks to extremely wet weather during 2Q10, Indonesian coal production was negatively affected. However, should the weather normalize next year, there could be an upside risk on Bank Indonesia’s US$0-1 billion current account deficit forecast for 2011.
All told, based on this meeting, I believe investors and analysts, predicting that Bank Indonesia will meaningfully hike its benchmark rate over the next 6-12 months to balance the Indonesian economy will be disappointed. I share Sin Beng Ong’s (my ASEAN economist, sinbeng.ong@jpmorgan.com, +65 6882 1623) view that the central bank will only raise its benchmark rate by 25bp in 1H11.
That said, I have more relatively bullish view on IDR than him, simply because I believe Bank Indonesia will be constrained by its balance sheet to continue its sterilization activities at this current pace. Moreover, the current political tussle between the bank and the Ministry of Finance regarding the establishment of the Otoritas Jasa Keuangan (OJK, the equivalent of the Indonesian Financial Supervision Agency) will make it difficult for Bank Indonesia to ask additional capital from the Ministry of Finance, should its sterilization activities erode its capital.
Three weeks ago (please refer to my e-mail: JPM Indo: Economist’s View: The Indonesian new conundrum, dated on Sep 2, 2010, I recommended you to buy Ramayana, Unilever, Bank Danamon, Semen Gresik, Holchim Indonesia, Astra International, and Alam Sutera as the direct and indirect beneficiaries of relatively stable interest rate and stronger currency, resulting in rising purchasing power of the “haves” as well as blue collar workers in the non-tradable manufacturing sectors. While I still like Bank Danamon (+10.4% since Sep 2, 2010), Astra International (+10.3%), and Semen Gresik (+7.9%), as these stocks have relatively outperformed the market (+7.8%), my bias is to focus on Unilever Indonesia (+4.7%), Holchim Indonesia (+5.6%), and Alam Sutera (+1.6%). I stop chasing Ramayana as the stock has not reacted well to its Hari Raya sales.
Perf. Mkt
since cap ADTV* ---P/E^----
Stock Ticker IDR Jun 30 US$ B US$M FY10 FY11
Unilever UNVR IJ 16,750 -1.2 14.25 3.62 34.7 30.2
Alam Sutera ASRI IJ 195 +6.6 0.38 2.03 15.1 9.4
Bank Danamon BDMN IJ 5,850 +8.3 5.49 3.44 17.4 14.0
Holchim Indo SMCB IJ 2,375 +9.2 2.03 2.30 17.6 14.0
Semen Gresik SMGR IJ 9,600 +9.7 6.35 7.87 15.1 13.0
Astra Intn’l ASII IJ 55,200 +14.3 24.92 21.55 17.8 15.5
*Average daily turnover over the past three months.
^Consensus P/E.
Moody's confirms Bumi's ratings at Ba3; outlook negative
Hong Kong, September 20, 2010 -- Moody's Investors Service has today confirmed its Ba3 corporate family rating on PT Bumi Resources Tbk ("Bumi") and on the senior secured bond issued by Bumi Capital Pte Ltd, which is wholly owned and guaranteed by Bumi. The outlook on the ratings is negative.
This action closes the review for possible downgrade which was initiated on 14th May 2010.
"The confirmation reflects Moody's expectation that Bumi will arrange sufficient funding to address its very near term refinancing requirements and that its underlying performance will show gradual improvement," says Laura Acres, a Moody's Vice President and Senior Credit Officer.
The Ba3 rating also reflects Bumi's majority ownership in two of Indonesia's largest thermal coal mines. Both mines have long reserve lives and well established operations with a track record of consistent production growth. While the holdco debt burden is high, the position is partially ameliorated by the low leverage at the coal mines and the cash flows they generate. These cash flows are caught under Bumi's Cash Distribution Agreements and as such provide some protections to creditors as regards debt service; however, final repayment risk continues to lie with the holdco.
"The negative outlook reflects ongoing refinancing risk at the holdco level over the next 12 months (assuming all puts are exercised), although Moody's notes the committed facilities in place to cover near term maturities, specifically those in Q4 2010," says Acres, adding, "The negative outlook also reflects the extent to which Bumi's performance, despite improvement, is below its projections, particularly in terms of
normalized, consolidated adjusted debt/EBITDA which stood at 3.9x on an LTM basis and was above the downward trigger of 3.0x."
"Given underlying improved performance at the coal companies in H1 2010, together with plans to raise US$350-400 million through the pre-emptive rights issue, the proceeds of which will be deployed towards debt repayment, it is Moody's expectation that debt/EBITDA could fall to 3.0-3.3x for FY 2010, which is still considered high for Ba3 rating," says Acres, also Moody's Lead Analyst for Bumi.
Upward rating pressure is unlikely given the negative outlook. The outlook could revert to stable should Bumi deliver on its financial projections and offer a clear plan to reduce the debt burden such that adjusted, consolidated, debt/EBITDA falls below 3.0x on a consistent basis.
Further downward pressure could emerge on the rating should Bumi fail to deal convincingly with its debt maturity profile over the next 12 months such that it refinances facilities with other short-term lines. Moody's would also be concerned if production at the coal companies faltered such that Bumi was unable to deliver on its projections and specifically its deleveraging plans or if it deviates from the business plan and strategy
currently contemplated as part of the rating. Moody's would also look for holdco leverage to decrease and failure to do so would put downward pressure on the rating.
The principal methodology used in rating Bumi was Moody's Global Mining Industry published in May 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.
The last rating action was taken on 14th May 2010 when Bumi's ratings were placed under review for possible downgrade following worse than expected financial performance and eroding headroom under covenants.
Established in 1973 and listed on the Jakarta Stock Exchange in 1990, Bumi is Indonesia's largest thermal coal producer and one of the top three largest thermal coal exporters globally. Through its principal assets (65% stake in PT Kaltim Prima Coal and 70% stake in PT Arutmin), Bumi accounts for approximately 25% of Indonesia's total coal production.
Approximately 19.3% of Bumi's shares are held by Bakrie & Brothers, which is controlled by members of the Bakrie family. Members of the Bakrie family (outside of Bakrie & Brothers) also own shares in Bumi.
* Indomobil (IMAS IJ) – Suzuki Motor Corporation will make US$460mn fresh investment to its assembly plant in Bekasi, West Java, to double its capacity from 100k to 200k per year, in 2011. (Bisnis Indo).
* Gajah Tunggal (GJTL) and Multistrada (MASA) – global tyre producers Bridgestone and Goodyear planning to hike prices again by 6.5% in October, after passing through a 6% price increase in August. (Kontan).
* Bumi Resources (BUMI IJ) – investor relations Dileep Srivastava said that the company is maintaining a minimum share price of Rp2366 for its new share issue, book building to close on 30 Sept. (Investor Daily).
* Bakrie Telecom (BTEL IJ) and Telkom (TLKM IJ) – Public relations of KPPU (anti-monopoly body) told the press that Telkom Flexi-Bakrie Tel consolidation does not violate law number 5/1999 regarding monopoly practices. Indonesia’s telecom association (Mastel) offers its professional view that CDMA and GSM operators are effectively direct competitors. (Investor Daily).
* Kageo Igar Jaya (IGAR IJ) – Kingsford Holdings launched a tender offer on the stock at Rp185, full info memo out on the local press. Stock closed at Rp181 yesterday. (Bisnis Indo).
* Hexindo (HEXA IJ) – Itochu Corp increased its stake in Hexa from 22.5% to 25%, buying 21mn shares at Rp5000 (last close Rp5600). (Investor Daily).
* Aneka Tambang (ANTM IJ) – Jinchuan Group of China plans to make US$2bn investment in nickel project in Halmahera, North Maluku, in partnership with ANTM. (Bisnis Indo).
Research Call
Astra Agro Lestari: upgrade from U/W to O/W
Aditya Srinath has upgraded his U/W stance on AALI to O/W. The stock has lagged the JCI by 13% and the Jakarta Agri Index by almost 8%. Reasons to be more positive now:
(1) CPO output in August up y/y for the first time this year: AALI’s CPO Output grew 9% m/m in August, posting a 7% y/y growth and arresting a trend of y/y declines going back to January. Seasonally adjusted monthly harvest data suggests a healthy recovery in output.
(2) Consensus FY10E EPS down 18% in the last quarter: Earnings expectations have declined sharply - In June 2010 JPM FY10E EPS was 23% below consensus, but street revisions have resulted in our forecasts now being slightly higher. With volumes recovering and CPO prices healthy, we believe that the downside to estimates should be arrested in the near term.
https://mm.jpmorgan.com/servlet/PubServlet?skey=R1BTLTQ3NTM2OC0w&Name=GPS-475368-0.pdf
My take -- could be a prelude for Aditya to extend his O/W rating and price target on parent company Astra International, but a rotation into CPO plays may not be a bad idea. Bakrie Plantations (UNSP) is the main laggard in the space with biggest exposure into natural rubber.
Sales Call
Bumi Resources: Bakrie’s back
Against the odds, Moody’s has decided not to downgrade Bumi’s Ba3 bond rating, believing that Bumi will arrange sufficient funding to address its very near term refinancing requirements and that its underlying performance will show gradual improvement. They maintain negative outlook to reflect ongoing refinancing risk at the holdco level over the next 12 months (assuming all puts are exercised), but notes that committed facilities are already in place to cover near term maturities, specifically those in Q4 2010. (Full article below)
My take – looking at the share price action, I won’t be surprised if we see the company announcing details of its non pre-emptive share issue plan sometime this week, including fresh information on the parties who will take-up the shares. We may see further rally in Bakrie group stocks on the back of Bumi addressing its refinancing and deleveraging concerns. Bakrie & Brothers CFO recently disclosed the information that Glencore had purchased US$200mn worth of Bumi shares in the market, suggesting that the stock could be under-owned by institutional investors.
Bumi offers the second most attractive EV/reserves valuation amongst the listed Indo coal stocks, at US$3.46/ton (reserves) and US$0.94/ton (resources), after adjusting for an estimated US$1bn equity value of its minority stake in PT Newmont Nusa Tenggara. Indo Tambang trades on US$15.48 (reserves) and US$2.30 (resources), Adaro trades on US$8.16 (reserves) and US$1.72 (resources), Indika on US$6.93 (reserves) and US$2.13 (resources), while PT Bukit Asam on US$2.13 (reserves) and US$0.45 (resources). BUY.
Rizz note: IDR could touch 8,000/USD sometime next year
* Investors and analysts, expecting that Bank Indonesia will meaningfully hike its benchmark rate to keep the Indonesian economy in balance over the next 6-12 months, will be disappointed as the central bank is likely to opt for a gradual IDR appreciation as its monetary tightening tool.
* At the personal level, I believe IDR could touch 8,000/USD sometime next year as Bank Indonesia will be constrained by its balance sheet to continue its sterilization activities at this current pace.
* While I still like Bank Danamon (BDMN), Astra International (ASII), and Semen Gresik (SMGR) on the back of relatively stable interest rates and stronger currency, resulting in rising purchasing power among the “haves” as well as blue collar workers in the non-tradable manufacturing sectors, as these stocks have relatively outperformed the market MTD, I will switch my attention more on Unilever Indonesia (UNVR), Holchim Indonesia (SMCB), and Alam Sutera (ASRI). I stop chasing Ramayana Lestari (RALS) as the stock has not reacted well to its Hari Raya sales.
As part of my national service, your Jakarta-based observer was summoned and asked by Bank Indonesia’s economic and monetary research department yesterday afternoon to provide inputs on one of topics (please refer to the subject of this e-mail), which will be discussed by the central bank’s Board of Governor in its upcoming October monthly meeting. Below are my impressions on how Bank Indonesia looks at the dynamic of the country’s Balance of Payment (BoP), having had a full three hours debate with its senior economists and analysts:
* First, I sense that the central bank is getting nervous about its FX sterilization cost. Umar Juoro, one of members of Bank Indonesia’s supervisory board, told me over the weekend that the sterilization cost begins to meaningfully erode the bank’s capital. Some of these senior economists and analysts were shocked when I said that there is more than 50% likelihood the net portfolio investment flow next year will exceed US$5 billion (their base case scenario, vs. the estimated US$10-12 billion net portfolio inflow during the current year).
* Second, compared to two months ago, more senior economists and analysts in Bank Indonesia believe that the gradual appreciation of IDR is a better monetary tightening tool vis-à-vis raising the benchmark rate. It is an encouraging to learn that these deep
thinkers start to analyze whether job creations in non-tradable manufacturing sectors could offset job losses in tradable manufacturing sectors, resulting from the strengthening of IDR.
* Third, Bank Indonesia admitted that its existing 2011’s current account surplus estimate of US$3-4 billion is too optimistic and is likely to revise it down to US$0-1 billion deficit. That said, what caught me by surprise is the downward revision is mainly caused by significantly higher oil deficit, instead of the weakening of exports due to stronger currency assumption. Pertamina (the state-owned oil and gas company) was apparently asked by PLN (the state-owned electricity company) to import higher than usual diesel oil during 1H10 as PLN could not get enough coal from domestic producers to fire up its coal fired power plants. I inform these senior economists and analysts that, thanks to extremely wet weather during 2Q10, Indonesian coal production was negatively affected. However, should the weather normalize next year, there could be an upside risk on Bank Indonesia’s US$0-1 billion current account deficit forecast for 2011.
All told, based on this meeting, I believe investors and analysts, predicting that Bank Indonesia will meaningfully hike its benchmark rate over the next 6-12 months to balance the Indonesian economy will be disappointed. I share Sin Beng Ong’s (my ASEAN economist, sinbeng.ong@jpmorgan.com, +65 6882 1623) view that the central bank will only raise its benchmark rate by 25bp in 1H11.
That said, I have more relatively bullish view on IDR than him, simply because I believe Bank Indonesia will be constrained by its balance sheet to continue its sterilization activities at this current pace. Moreover, the current political tussle between the bank and the Ministry of Finance regarding the establishment of the Otoritas Jasa Keuangan (OJK, the equivalent of the Indonesian Financial Supervision Agency) will make it difficult for Bank Indonesia to ask additional capital from the Ministry of Finance, should its sterilization activities erode its capital.
Three weeks ago (please refer to my e-mail: JPM Indo: Economist’s View: The Indonesian new conundrum, dated on Sep 2, 2010, I recommended you to buy Ramayana, Unilever, Bank Danamon, Semen Gresik, Holchim Indonesia, Astra International, and Alam Sutera as the direct and indirect beneficiaries of relatively stable interest rate and stronger currency, resulting in rising purchasing power of the “haves” as well as blue collar workers in the non-tradable manufacturing sectors. While I still like Bank Danamon (+10.4% since Sep 2, 2010), Astra International (+10.3%), and Semen Gresik (+7.9%), as these stocks have relatively outperformed the market (+7.8%), my bias is to focus on Unilever Indonesia (+4.7%), Holchim Indonesia (+5.6%), and Alam Sutera (+1.6%). I stop chasing Ramayana as the stock has not reacted well to its Hari Raya sales.
Perf. Mkt
since cap ADTV* ---P/E^----
Stock Ticker IDR Jun 30 US$ B US$M FY10 FY11
Unilever UNVR IJ 16,750 -1.2 14.25 3.62 34.7 30.2
Alam Sutera ASRI IJ 195 +6.6 0.38 2.03 15.1 9.4
Bank Danamon BDMN IJ 5,850 +8.3 5.49 3.44 17.4 14.0
Holchim Indo SMCB IJ 2,375 +9.2 2.03 2.30 17.6 14.0
Semen Gresik SMGR IJ 9,600 +9.7 6.35 7.87 15.1 13.0
Astra Intn’l ASII IJ 55,200 +14.3 24.92 21.55 17.8 15.5
*Average daily turnover over the past three months.
^Consensus P/E.
Moody's confirms Bumi's ratings at Ba3; outlook negative
Hong Kong, September 20, 2010 -- Moody's Investors Service has today confirmed its Ba3 corporate family rating on PT Bumi Resources Tbk ("Bumi") and on the senior secured bond issued by Bumi Capital Pte Ltd, which is wholly owned and guaranteed by Bumi. The outlook on the ratings is negative.
This action closes the review for possible downgrade which was initiated on 14th May 2010.
"The confirmation reflects Moody's expectation that Bumi will arrange sufficient funding to address its very near term refinancing requirements and that its underlying performance will show gradual improvement," says Laura Acres, a Moody's Vice President and Senior Credit Officer.
The Ba3 rating also reflects Bumi's majority ownership in two of Indonesia's largest thermal coal mines. Both mines have long reserve lives and well established operations with a track record of consistent production growth. While the holdco debt burden is high, the position is partially ameliorated by the low leverage at the coal mines and the cash flows they generate. These cash flows are caught under Bumi's Cash Distribution Agreements and as such provide some protections to creditors as regards debt service; however, final repayment risk continues to lie with the holdco.
"The negative outlook reflects ongoing refinancing risk at the holdco level over the next 12 months (assuming all puts are exercised), although Moody's notes the committed facilities in place to cover near term maturities, specifically those in Q4 2010," says Acres, adding, "The negative outlook also reflects the extent to which Bumi's performance, despite improvement, is below its projections, particularly in terms of
normalized, consolidated adjusted debt/EBITDA which stood at 3.9x on an LTM basis and was above the downward trigger of 3.0x."
"Given underlying improved performance at the coal companies in H1 2010, together with plans to raise US$350-400 million through the pre-emptive rights issue, the proceeds of which will be deployed towards debt repayment, it is Moody's expectation that debt/EBITDA could fall to 3.0-3.3x for FY 2010, which is still considered high for Ba3 rating," says Acres, also Moody's Lead Analyst for Bumi.
Upward rating pressure is unlikely given the negative outlook. The outlook could revert to stable should Bumi deliver on its financial projections and offer a clear plan to reduce the debt burden such that adjusted, consolidated, debt/EBITDA falls below 3.0x on a consistent basis.
Further downward pressure could emerge on the rating should Bumi fail to deal convincingly with its debt maturity profile over the next 12 months such that it refinances facilities with other short-term lines. Moody's would also be concerned if production at the coal companies faltered such that Bumi was unable to deliver on its projections and specifically its deleveraging plans or if it deviates from the business plan and strategy
currently contemplated as part of the rating. Moody's would also look for holdco leverage to decrease and failure to do so would put downward pressure on the rating.
The principal methodology used in rating Bumi was Moody's Global Mining Industry published in May 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.
The last rating action was taken on 14th May 2010 when Bumi's ratings were placed under review for possible downgrade following worse than expected financial performance and eroding headroom under covenants.
Established in 1973 and listed on the Jakarta Stock Exchange in 1990, Bumi is Indonesia's largest thermal coal producer and one of the top three largest thermal coal exporters globally. Through its principal assets (65% stake in PT Kaltim Prima Coal and 70% stake in PT Arutmin), Bumi accounts for approximately 25% of Indonesia's total coal production.
Approximately 19.3% of Bumi's shares are held by Bakrie & Brothers, which is controlled by members of the Bakrie family. Members of the Bakrie family (outside of Bakrie & Brothers) also own shares in Bumi.
This communication is for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. All market prices, data and other information are not warranted as to completeness or accuracy and are subject to change without notice. Any comments or statements made herein do not necessarily reflect those of JPMorgan Chase & Co., its subsidiaries and affiliates. This transmission may contain information that is privileged, confidential, legally privileged, and/or exempt from disclosure under applicable law. If you are not the intended recipient, you are hereby notified that any disclosure, copying, distribution, or use of the information contained herein (including any reliance thereon) is STRICTLY PROHIBITED. Although this transmission and any attachments are believed to be free of any virus or other defect that might affect any computer system into which it is received and opened, it is the responsibility of the recipient to ensure that it is virus free and no responsibility is accepted by JPMorgan Chase & Co., its subsidiaries and affiliates, as applicable, for any loss or damage arising in any way from its use. If you received this transmission in error, please immediately contact the sender and destroy the material in its entirety, whether in electronic or hard copy format. Thank you. Please refer to http://www.jpmorgan.com/pages/disclosures for disclosures relating to European legal entities.
Privileged/confidential information may be contained in this message. If you are not the named recipient or addressee, you are hereby notified that any use review, disclosure or copying of the contents herein is strictly prohibited. In such a case, kindly discard all its contents and notify sender accordingly regarding such unauthorized disclosure or transmission by email.
Opinions, conclusions, statements and other information in this message that do not relate to the official business of CIMB Group shall be understood as neither given or endorsed by it.
The contents herein are meant strictly for the use of the named recipient or addressee of CIMB Group. No assumption of responsibility or liability whatsoever is undertaken by CIMB Group in respect of prohibited and unauthorised use by any other person.
******************* DISCLAIMER *******************
