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Tuesday, September 6, 2011

Bumi Resources - Outperforming

by Kresna Securities

Lower volume, much stronger ASP. The 1H11 sales volume figure slipped slightly, moving down 5.5%YoY to 29.9mt, inline with 2.3% less coal mined (29.9mt) than the prior period, a result of higher rainfall. Coal mined in KPC decreased 3.7%YoY to 18.3mt, while in Arutmin it rose 1.8%YoY to 11.5mt. Nonetheless, ASP rose significantly, up 36.1%YoY to US$91.3/ton. Specifically, KPC and Arutmin ASP climbed 36.2% and 31.7% to US$96.8/ton and US$81.5/ton,

respectively, compared to the prior period. Noteworthy is that the 2Q11 ASP figure continued rising by 7.7% compared to that of 1Q11.

Production costs went up 22.8%YoY to US$44.7/ton. The higher production cost was attributable to more expensive fuel, increased contractor costs and stripping ratio (12.0x, 16.5% higher than over the same period last year, due to the opening of additional pits at KPC site and a higher level of rainfall). Going forward, stripping ratio is expected to decrease along with a forecast of improved weather.

Update from BRMS transaction.

As of this writing, the transaction’s status still requires endorsement of Bumi plc, Bumi Resources and BRMS shareholders, through formal approval in an EGM. The management of Bumi Resources had initially scheduled an EGM for 23rd Aug, before deciding to postpone it until after the fasting month. On the other hand, Bumi plc sets a target to complete the acquisition by 4Q11.

Outperforming our expectations.

By simply multiplying 1H11 sales volume with ASP, we arrive at an 1H11 revenue indication above our estimates, reaching 61.3% of our FY11E (using old accounting standard). Production volume realization, which reached 45.5% from our FY11E, should stay in line with our expectations as we anticipate stronger operation volume in 2H. On the other hand, ASP was 37.7% higher than our projection. We maintain BUY- TP4,500.

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