BUMI Resources, Maintain Buy

The JCI has been performing as the best market in the world this year, with ytd return of 40%. Some of the blue chip stocks has been continually making a new record high. One of the laggard is BUMI. As we all know, BUMI management always make some maneuver that for some investors is so hard to understand. That makes BUMI performance ytd is -5%.

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.

Target for 2010

The market starts the trading day in 2010 with confidence and full of optimism. You guys might have your personal target for Jakarta Composite Index (JCI) this year. (Please join the poll at the bottom of my blog). Me personally, set 2950 – 3000 as the target for this year or around 15% - 20% return for full year 2010.

The commodity sector I believe would be the main index mover at the beginning of the year, with BUMI as my favorite stock in this sector. I set the TP for BUMI at 4000. The plan to double its production in 2012 would be the main factor to the price movement.

The other stock that I like from Bakrie group is ELTY. The Book Value of ELTY today is around 213. If ELTY could grow about 20% this year, its book value is expected to be at 250. With P/BV ratio of 2, I am expecting ELTY to reach 500 at the end of 2010 or more than 100% gain.

I also still like cement sector with SMGR as my top pick. I am expecting SMGR to grow 20% - 30% this year. With this projection of growth, I am expecting SMGR to reach 9000 – 10000 level this year. Since 2005, SMGR has been successful in growing its book value 20% every year. Hence, I believe it is not a difficult task for SMGR to repeat its growth story.

In banking sector, I would overweight BBRI. I am expecting BBRI to grow 15% - 25% this year. The yoy inflation rate in December 2009 at 2.78% is very likely to boost the credit consumption. The TP that I set for BBRI is at 9200.

Here is the summary of the target price of the index and some stocks that I picked:

	Price 2009	Target Price	Potential Gain
JCI	2534	3000	18.39%
BUMI	2425	4000	64.95%
ELTY	193	500	159.07%
SMGR	7550	10000	32.45%
BBRI	7650	9200	20.26%

BUMI is Lagging the market

Over the last 3 months BUMI has been lagging the overall market. This condition, I believe due to the management way of handling the debt. My previous price target of BUMI was 4000 at the end of 2009. It is very little chance for BUMI to reach that target. Even though BUMI would not be able to reach 4000 this year, I still optimistic that BUMI would pass that target next year.

I would show you some charts, showing the relative performance of BUMI against the other stocks. The first chart would show you the performance of BUMI against other coal stocks over the last 3 months.

(Source: Bloomberg, click to enlarge)

As you can see, BUMI performance is -17% (green line) and the mining index is close to 0 (yellow line) PTBA and ADRO both are performing so nice up more than 25% (red and yellow lines)

On the second chart you could see that compare to other large cap stocks, BUMI has been lagging these other large caps. BBRI (green line), ASII (yellow line), and SMGR (orange line) are performing positively.

(Source: Bloomberg, click to enlarge)

The future performance of BUMI would heavily influenced by the 3Q result which will be published the end of the year. If the result is good, I believe BUMI would go beyond 3000 level.

While the Jakarta Composite Index has reached 2500, it would not go to 2600 if BUMI which is heavily weighted the index still lag the market behind. I am expecting BUMI to reach 2800 at the end of the year, so that the JCI rally would continue.

BUMI resources (BUMI) or ADARO (ADRO) ?

Many people avoid in collecting BUMI stock lately since the management have made some bad decisions according to the market participants. As we all know, BUMI has acquired DEWA, Fajar Bumi Sakti and Pendopo Energi Batubara in last December with total transactions more than 6 trillion rupiah. I was also avoiding to collect BUMI but I changed my mind since I look at its performance last year compare to Adaro which has been one of my favorite stock. I will show it to you...

BUMI	2008	2007
Total Asset (Mio IDR)	63,838,904.27	33,832,800.00
Book Value (Mio IDR)	18,922,758.71	13,464,000.00
Net Cash Flow (Mio IDR)	2,063,367.36	1,724,346.32
CAPEX (Mio IDR)	-6,799,282.42	-3,495,600.00
Sales (Mio IDR)	40,540,717.26	27,186,000.00
Operating Income	13,292,584.70	4,514,400.00
Net Income	7,744,383.10	9,468,000.00
Dividend	968,006.53	1,964,400.00
Total Share	19,404.00	19,404.00
Profitability
ROE	40.93%	70.32%
ROA	12.13%	27.98%
Operating Profit Margin	32.79%	16.61%
Net Profit Margin	19.10%	34.83%
Financial Risk
Debt / Equity	2.37	1.51
Valuation
BV per share	975.20	693.88
EPS	399.11	487.94
Sales per share	2089.30	1401.05
Cash Flow per share	106.34	88.87
ADARO	2008	2007
Total Asset (Mio IDR)	33,720,170.00	14,688,700.00
Book Value (Mio IDR)	14,009,245.00	2,150,554.00
Net Cash Flow (Mio IDR)	1,380,292.00	44,784.00
CAPEX (Mio IDR)	-1,463,972.00	-650,770.00
Sales (Mio IDR)	18,092,502.00	11,592,640.00
Operating Income	4,211,858.00	2,252,519.00
Net Income	887,198.00	88,534.00
Dividend	0.00	0.00
Total Share	25,348.51	1,427.97
Profitability
ROE	6.33%	4.12%
ROA	2.63%	0.60%
Operating Profit Margin	23.28%	19.43%
Net Profit Margin	4.90%	0.76%
Financial Risk
Debt / Equity	1.41	5.83
Valuation
BV per share	552.67	1506.02
EPS	35.00	62.00
Sales per share	713.75	8118.27
Cash Flow per share	54.45	31.36

If you look at the BV per share, BUMI is worth for 975.20. Today BUMI closed at 900, so just based on BV BUMI is relatively attractive. You could also compare it with ADRO which has BV per share of 552.67, which today closed at 890. From this point of view, BUMI should be rewarded with higher market price.

If we look at the D/E ratio we should agree that there has been some weaker indicator in BUMI which has changed its D/E ratio to 2.37. But I think this value is comparable with its long term expansive plan.

If you compare the EPS, Sales per share or CF per share, you might also realize that obviously BUMI is more attractive than ADRO at this present time. Also you could check the profitability. As a company BUMI has given its shareholder significant ROE.

So I guess I would start to accumulate BUMI again this week..

Bumi Resources (BUMI) menuju 950 ?

Saham BUMI berpeluang bergerak menuju resistance berikutnya di sekitar 950. Jika dalam beberapa hari ini volume transaksi BUMI menunjukkan peningkatan signifikan dan juga mampu ditutup diatas level 800, maka indikasi penguatannya semakin jelas. Jika dilihat secara teknikal, ada indikasi terbentuknya formasi bullish triangle. Saya amati sejak awal minggu lalu, broker asing seperti CS,ML,DB dan ZP sudah terus menerus melakukan akumulasi saham BUMI. Ekspektasi saya sebelum bulan Mei 2009 BUMI mampu menuju 950. Sekarang mari kita amati pergerakan saham BUMI..

Bumi Resources (BUMI:IJ)

Bumi Resources (BUMI) price has been decreasing over the last week. The commodities spot price has been influencing the BUMI price movements. In the next few weeks, it is expected that BUMI stock price would be up. I drew some trend lines to support my argument technically.