Generally positive response —The majority of 28 investors we met during the NDR in
UK and Europe last week appeared to be underweight or neutral at best on Bumi
Resources. However, most of the investors warmed up to the company’s main
messages of deleveraging and production ramp up. Hence, the share price is likely to
see a substantial rebound if the company delivers on these key issues.
Intent on deleveraging — Bumi remains committed to deleverage its balance sheet
with the main priority of retiring the expensive CIC debts. Bumi plans to prepay
US$600m of CIC debts two years early in October 2012 and another US$150m of
commercial debts in 4Q12. If realized, Bumi’s debts would be reduced to slightly under
US$3b at end-2012. This along with the refinancing of CIC’s first debt tranche of
US$600m in November 2011 would save the company US$200m of annual interest (ex
the US$30m one-off penalty for CIC’s debt prepayment) from the estimated US$600m
in 2011. The company has further plans to prepay or refinance CIC’s final debt tranche
of US$700m in 2013 but we are less certain on the funding source for the prepayment.
Show me the money — The source of funds for prepayment was of keen interest for
the investors. The entire US$750m funds would come from non-operational cash.
About US$230m would come from the planned redemption of the discretionary fund at
Recapital Asset Management, which after several extensions in the past look set to be
redeemed at late August 2012 when the contract expires. Another US$130m would be
collected from the partial repayment of Bukit Mutiara’s US$260m loan, which initially
lent to Berau’s current majority owner in November 2009 for the acquisition of Berau.
Finally, Bumi is mulling to partially divest its 87% stake in Bumi Resources Mineral to
raise the balance of US$390m.
Production ramp-up appears on track — Bumi reiterated its intention to increase its
production to 114m tons in 2014 (100m tons from KPC and Arutmin; the balance from
Fajar Bumi Sakti and Pendopo). Construction of the new 32mtpa conveyor belt is
slated to be completed in April and be operational in 2H12. KPC has also recently
upgraded its ship loading capacity from 4,700 tph to 7,500 tph.
Deferred stripping costs write off — Bumi is mulling to phase out the deferred
stripping costs from its balance sheet (US$489m at the end of September 2011). The
charge would be largely against its retained earnings with a small portion to be charged
against 2012 production costs.
Download file : BUMI Non-Deal Roadshow Insights
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