CLSA Bumi Resources – FY08 results not looking great

Bumi Resources – FY08 results not looking great, accumulating debt (from Olie)

The company posted net profit US$645m in FY08, doubled previous year’s core profit. Reported earning in FY08 was down by 18% YoY due to one-off gain posted in FY07.
FY08 net profit came in 10% below our forecast, though in line with consensus estimates. Operating performance does not look solid, with revenue and operating profit in during the year were 5% and 10% below our and consensus forecasts. The company also posted higher than assumed interest and amortization expenses. Details are not available as yet.
What is more concerning to us is the sustained trend of debt added to the balance sheet, as total debt jumped to US$1.7bn in Dec08, or up by US$600m in 4Q08 alone following US$660m addition in 3Q08.
We think most of the debt addition has gone to investment in Bumi non-core assets, as investment in non-core assets amounting to US$580m in 4Q08. This includes increases investments in oil and gas assets, explorations spending in non-coal business, and higher goodwill.
We retain SELL rating.