NISP Bumi Resources managed to deliver satisfying 1H10 results (BUMI, Rp1,710, Buy)

· During 1H10, Bumi Resources managed to become the largest coal producer to post a positive growth in its operating income at US$531.8mn, 5.4% YoY higher from US$504.6mn a year earlier. In addition, all of the coal producers in our coverage posted negative growth during the period, due to lower selling price and higher direct cost. Bumi’s result came in inline with our expectation as 1H10 operating income came in at 45.2% to our and consensus’ full year expectation.

· However, as the company kept improving its tax policy in order to cope with recent issue, the company deducts its tax payables that caused a higher effective tax at 48.6% compared to 40.9% in 1H109. Hence, bottom line decreased by 30.0% YoY to US$134.6mn from US$192.3mn. The company’s tax payable position in 1H10 decreased to US$249.0mn from US$590.2mn a year earlier.

· Operational wise, revenue grew by 25.1% YoY on the back of higher sales volume and stronger ASP in 1H10. This improvement managed to overcome stronger COGS as the company boosted its production during 1H10.

· On quarterly basis, the company also managed to demonstrate positive performance on the back of stable sales volume and 14.2% QoQ increase in ASP.

· In all, Bumi Resources managed to post strong results in 1H10 and we foresee it will continue in 2H10 due to stable high selling price as the company is about to deliver another 10mn tons – 12mn tons at US$104/ton to Japan in the next three quarters.

· Currently the company is trading at 2011F PER of 10.9x and EV/EBITDA of 5.1x, Buy.