CLSA BUMI 1Q'09

Bumi Resources posted a net profit of US$m125m in 1Q09, up by 21% YoY while representing around 27% of our full year 2009 forecasts.
The result was not that encouraging, in our view, particularly since 1Q09 net profit was actually down by 20% QoQ, with Bumi coal ASP fell by 6% QoQ. Bumi was the only Indonesian coal company posting quarterly profit decline.
Profit in 1Q09 was helped by lower than assumed tax rate.
Production volume was down by 9% YoY and 24% QoQ in 1Q09.
Cash cost in 1Q09 was down by 11% YoY and 17% QoQ, a reflection of the sharp decline in fuel costs.
Little evidences of profit contribution coming from the two recently acquired assets.
We calculated that even assuming a flat QoQ ASP in 2Q09, there is 3% to 5% downside risk to our assumed ASP in FY09, hence 11% to 18% risk on earnings.

Bumi Resources is the one with the most leverage to coal price, hence a play on commodity price recovery. Selling pressure on the name seems to have abated as well with group debt restructuring gradually progressing. Nonetheless, the recent operating and financial results were not encouraging while Bumi continue to be affected by significant balance sheet risk and governance issue. Bumi is trading at PER09 of 6.0, almost at par with domestic peers, despite the higher risks.

We retain our SELL rating.