The plan to divest its subsidiary Bumi Resources Mineral into an ipo this year will become a trigger to its stock price movement. Me personally still put some confidence in the future of this stock, the recent right issue to convert some of its debt into stock also could be seen as a positive signal for the future cash flow.
The transaction of this conversion was in the price of Rp 2,375, hence with the price of BUMI today of 2,300 per share should be seen as a discount.
In the beginning of 2010, I estimated the price of BUMI would be 4,000 at the end 0f 2010. I think we have to revise it target price based on current condition. I put 3,300 as the ideal target price for BUMI at the end of 2010. I noticed that lately foreign investors are accumulating this stock, hence I am expecting that when the JCI loose its momentum to go high further, investors will shift their portfolio to BUMI. We will see whether my guess will become a reality.
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2 comments:
Hi
Would you say now is a good time to go long on Bumi? Im bearish on the stockmarket in general in the short turn, so im hesitating if i should wait some time, for a coming general dip, how would that affect Bumi you think in the short term ?
Best regards Chreca
Hi Chreca..
Thanks for ur comment. In general, I agree with you that the market should be bearish for the short period. The recent rally to a new record close to 3600 should be followed by a significant correction.
From technical point of view, today 20 October 2010, the Jakarta Composite Index has gained 41% ytd, while BUMI still -1% ytd, hence I believe from technical point BUMI is undervalued.
I believe there should be more room for BUMI to go further. From fundamental view, the past actions of BUMI management to acquired some mining companies since last year backed by significant debt is clearer now. The management think that at that time the price of BUMI was significantly undervalued, hence they prefer to finance the acquisition by debt rather than equity. Now, when the market relatively overvalued, the management plan to do IPO for BRM, hence I believe this IPO will bring some significant cash for the group.
When the group offset its debt by the cash they generated from ipo, the financing cash flow would be much better for the companny, hence I believe the future growth for BUMI is very prospective.
To answer your question, in the short term I think investors are trying to buy BUMI from the dip, like today, when general market is -0.4%, BUMI gained +2.13%, so I see some shifting activity to BUMI. Hence me personally recommend Buy BUMI in short, medium and long term..
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