In a phone interiew with Bloomberg news, Pertamina’s CFO Frederick Siahaan said this Indonesia’s largest state-owned oil company has a plan to acquire PT Medco Energi International. He said that Pertamina may buy a stake in Medco’s parent company Encore Energy Ltd, but the company wants Medco to “spin-off” its non-oil and gas units before proceeding with an acquisition.
The comment confirms the on-going market speculation about such a deal, that has not really translated into the stock’s outperformance. I think MEDC is undervalued at its own right, whether or not the acquisition deal materialize. Oil price gained 2.2% overnight. On 23 Sep, JPMorgan’s global oil team put out bullish report raising 4Q10 average WTI forecast to US$81 (from US$75), and 4Q11 to US$88 (from US$85). I have copy & pasted my previous company visit note on MEDC below.
A number of bullish developments:
* Reserves – on its full year 2009 results reported at the end of March, the company reported a 160% jump in 1P reserves, from 89 mboe to 231 (net ownership to Medco). Total reserves and resources estimate went up by 10% from 725 mboe to 800. The driver behind the growth in 1P was the certification of Senoro’s gas reserves by GCA in Feb-10. According to the company, the Street could have missed flagging this important development. On the new 1P number, I calculate an attractive EV/1P reserves of US$6.31/boe.
* Lybia area 47 – this project is now resuming after the Lybian Investment Authorithy resolves the ownership issue, by taking over Verenex’s 50% participation interest (Medco owns the other half, and is now the operator for the block). DeGoyler Macnaughton estimated a contingent resource of 176 mboe for Medco’s 50% stake. In total, 21 wells have been drilled on area 47: 17 exploration and 4 appraisal wells. Of the 17 exploration wells, 12 wells are producing wells, estimated to produce 109,000 bpd (a big one, in the context of Medco’s current oil production of around 31,000 bpd). The consortium will drill 4 more exploration wells for US$30mn. Value of this project is not being reflected in Medco’s US$6.31/boe EV/1P reserves calculation.
* Senoro – this project is being fast-tracked now; government is expecting FID (final investment decision) by 31 Aug. The wheel has turned since the ministry of energy overturned Jusuf Kalla’s block on gas exports, allowing Senoro to export up to 70% of its gas output. State-owned banks have expressed willingness to support the project, which is estimated to cost up to US$3.1bn (a big chunk is on the downstream LNG plant, where Mitsubishi is majority).
Minggu, 03 Oktober 2010
Mandiri Sekuritas AALI: Too little improvement
AALI’s CPO production volume in August showed improvement but unfortunately the improvement mainly came from purchased FFB, which has lower operating margin than FFB from Nucleus. Meanwhile, AALI will lose 14,000ha of its unplanted Rights to Cultivate (42.7% of current unplanted Rights to Cultivate of 32,770ha) from divestment of SPS. We believe that AALI’s organic growth (i.e. new planting) will decrease significantly in the next two years due to limited remaining Rights to Cultivate. We maintain our SELL recommendation with T! P of Rp18 ,000/share, which implies PER10-11F of 15.0x and 14.9x, respectively. The counter is currently trading at PER10-11F of 18.1 x and 18.0x.
CPO production has improved but mainly came from purchased FFB. For the first time in 2010, CPO production in August exceeded last year figure (Aug’10 = 106,541ton vs Aug’09 = 99,317 ton), but unfortunately the increase mainly came from higher purchases of FFB from 3rd parties (Aug’10 = 64,798ton vs Aug’09 = 28,812 ton)which has operating margin of only around 10.0%, fall ! smaller t han Nucleus estates which generate operating margin of around 40.0%.
Nucleus’ FFB production per matured area in Aug’10 still below Aug’09 figure. Nucleus’ FFB production volume improved in August, increasing 5.2% from last year figure (Aug’10 =336,503ton vs Aug’09=319,876ton). Please remember that the main key driver of production cost is Nucleus’ matured area. Increase in Nucleus’ matured area will boost production costs. FFB production per nucleus’ matured area in Aug’10 was still below last year figure (Aug’10= 2.2ton FFB/Nucleus’ matured area Vs Aug’09= 2.3ton FFB/Nucleus’ matured area).
Divestment of SPS will reduce AALI’s unplanted Rights to Cultivate by 42.7%
AALI has signed a Conditional Sale and Purchase of Shares Agreement to sell SPS, one of AALI’s subsidiaries. Currently, SPS has a Rights to Cultivate of 17,000ha, with around 3,000ha planted area and around 14,000ha unplanted area (42.7% of current unplanted Rights to Cultivate of 32,770ha). By divesting SPS, AALI will lose its unplanted Rights to Cultivate by 42.7%. Considering the Government of Indonesia will impose a moratorium on issuance! of new R ights to Cultivate in 2011 and 2012, we believe that AALI’s organic growth (i.e. new planting) will decrease significantly in the next two years due to limited remaining Rights to Cultivate.
Maintain SELL recommendation on the counter. We maintain our SELL recommendation with 12-monthDCF-derived TP of Rp18,000/share (WACC of 11.8% and Terminal Growth of 6.0%). We have SELL recommendation due to its old plantation (55.0% of total plantation is in declining FFB yield phase in FY11F) and costly CPO production from nucleus’ newly matured plantation (for detail analysis, please see our report “Dragged down by plantations’ profile” on August 13, 2010).
CPO production has improved but mainly came from purchased FFB. For the first time in 2010, CPO production in August exceeded last year figure (Aug’10 = 106,541ton vs Aug’09 = 99,317 ton), but unfortunately the increase mainly came from higher purchases of FFB from 3rd parties (Aug’10 = 64,798ton vs Aug’09 = 28,812 ton)which has operating margin of only around 10.0%, fall ! smaller t han Nucleus estates which generate operating margin of around 40.0%.
Nucleus’ FFB production per matured area in Aug’10 still below Aug’09 figure. Nucleus’ FFB production volume improved in August, increasing 5.2% from last year figure (Aug’10 =336,503ton vs Aug’09=319,876ton). Please remember that the main key driver of production cost is Nucleus’ matured area. Increase in Nucleus’ matured area will boost production costs. FFB production per nucleus’ matured area in Aug’10 was still below last year figure (Aug’10= 2.2ton FFB/Nucleus’ matured area Vs Aug’09= 2.3ton FFB/Nucleus’ matured area).
Divestment of SPS will reduce AALI’s unplanted Rights to Cultivate by 42.7%
AALI has signed a Conditional Sale and Purchase of Shares Agreement to sell SPS, one of AALI’s subsidiaries. Currently, SPS has a Rights to Cultivate of 17,000ha, with around 3,000ha planted area and around 14,000ha unplanted area (42.7% of current unplanted Rights to Cultivate of 32,770ha). By divesting SPS, AALI will lose its unplanted Rights to Cultivate by 42.7%. Considering the Government of Indonesia will impose a moratorium on issuance! of new R ights to Cultivate in 2011 and 2012, we believe that AALI’s organic growth (i.e. new planting) will decrease significantly in the next two years due to limited remaining Rights to Cultivate.
Maintain SELL recommendation on the counter. We maintain our SELL recommendation with 12-monthDCF-derived TP of Rp18,000/share (WACC of 11.8% and Terminal Growth of 6.0%). We have SELL recommendation due to its old plantation (55.0% of total plantation is in declining FFB yield phase in FY11F) and costly CPO production from nucleus’ newly matured plantation (for detail analysis, please see our report “Dragged down by plantations’ profile” on August 13, 2010).
Bumi New Bond Issuance: Usage of proceeds
The proceeds from new Bumi bond issuance and Non-preemtive rights will be used to refinance existing debt:
1. Repay US$150m JP Morgan Credit facility US$150.0m
2. Repay US$100m CS Standby facility 73.0m
3. Repurchase/mandatory redemption Zero Coupon CB 130.1m
4. Repurchase/mandatory redemption 5% CB 300.3m
5. Repay US$80m RZB facility 80.0m
6. Repay US$300m CS facility 300.0m
This is actually VERY GOOD NEWS!!
1. Repay US$150m JP Morgan Credit facility US$150.0m
2. Repay US$100m CS Standby facility 73.0m
3. Repurchase/mandatory redemption Zero Coupon CB 130.1m
4. Repurchase/mandatory redemption 5% CB 300.3m
5. Repay US$80m RZB facility 80.0m
6. Repay US$300m CS facility 300.0m
This is actually VERY GOOD NEWS!!
Rabu, 29 September 2010
RTRS-S and P ASSIGNS PT BUMI RESOURCES NOTES 'BB' RATING
13:43 29Sep10 RTRS-TEXT-S&P assigns PT Bumi Resources notes 'BB' rating
(The following statement was released by the ratings agency)
Sept 29 - Standard & Poor's Ratings Services today assigned its 'BB' rating to the proposed issue of guaranteed senior secured notes by Bumi Investment Pte. Ltd., a wholly owned subsidiary of PT Bumi Resources Tbk. (Bumi). At the same time, we affirmed the corporate credit rating on Bumi (BB/Stable/--; ASEAN scale rating axBBB-) and the 'BB' issue rating on Bumi's senior secured notes due 2016.
The rating on the proposed notes reflects the irrevocable and unconditional guarantee by Bumi. The notes rank pari passu with the existing senior secured notes. Proceeds from the proposed notes will be used for refinancing Bumi's existing debt. The rating on the notes is subject to finalization of documentation.
The issue rating is the same as the corporate credit rating on Bumi as Standard & Poor's believes that the priority liabilities at Bumi's coal subsidiaries are unlikely to cause any structural subordination at Bumi, because of the limitation on the indebtedness and low level of other liabilities at the coal companies. Also, Standard & Poor's does not apply its subordination notching criteria to corporations that have operations in Indonesia, reflecting the difficulty in enforcing creditor rights under the country's legal system.
Bumi's financial risk profile is significant, with the current debt to EBTIDA slightly above 3.0x. The high debt burden is primarily due to its latest debt-funded investments in non-coal assets. The company plans to use proceeds from a proposed shares issuance and internal cash for its debt reduction. We expect Bumi to bring its debt to EBITDA to a more comfortable level of below 3.0x within the next 12 months.
Bumi is the largest producer and exporter of thermal coal in Indonesia with reserve life of about 40 years. However, Bumi's assets are located on Indonesia's Kalimantan Island, exposing the company to geographical and single mineral risk. The company's 10 largest customers accounted for about 48% of its sales in the fiscal year ended Dec. 31, 2009, leading to a sizeable customer concentration risk. These risks are balanced by Bumi's good-quality thermal coal reserves, favorable mining strip ratios and low cost profile.
In our opinion, Bumi's liquidity is adequate. As at June 30, 2010, the company had US$291 million of cash in hand and an additional US$124 million in restricted cash. Bumi's funds from operations (FFO) amounted to about US$246 million in the first half of fiscal 2010. We expect its FFO to be about US$600 million for fiscal 2010. The expected short-term debt payable in the next 12 months is about US$450 million. Bumi should be able to cover the near-term debt maturities with the internal cash flows and cash at hand. Bumi's relationships with the banks remain sound and its credit market standing is satisfactory. The company is expected to redeem about US$400 million of convertible bonds by the end of 2010. Bumi has stand-by credit facilities of about US$400 million to meet these convertible bond redemptions in case the proposed bond issuance fails.
In addition to the proposed notes, Bumi intends to issue shares to raise about US$350 million. The equity issuance will provide Bumi with additional liquidity. We view Bumi's foreign exchange risk as low, given that the company's revenues and the bulk of its costs and debt are denominated in U.S. dollar or linked to it.
As at June 30, 2010, Bumi was in compliance of required covenants and we expect it to remain in compliance going forward. However, if Bumi is unable to reduce debt or raise EBITDA, the headroom for its covenants will be limited starting December 2011, when the debt to EBITDA covenant steps down to 3.0x from 4.0x.
The stable outlook on the corporate credit rating reflects our view that Bumi's steady cash flow will be supported by growing demand for thermal coal and steady growth in company's production.
RELATED CRITERIA AND RESEARCH
-- Corporate Ratings Criteria 2008, published April 15, 2008.
-- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, published May 27, 2009.
((Bangalore Ratings Team, +91 80 4135 5415, Hotline: 4135 5898
(The following statement was released by the ratings agency)
Sept 29 - Standard & Poor's Ratings Services today assigned its 'BB' rating to the proposed issue of guaranteed senior secured notes by Bumi Investment Pte. Ltd., a wholly owned subsidiary of PT Bumi Resources Tbk.
The rating on the proposed notes reflects the irrevocable and unconditional guarantee by Bumi. The notes rank pari passu with the existing senior secured notes. Proceeds from the proposed notes will be used for refinancing Bumi's existing debt. The rating on the notes is subject to finalization of documentation.
The issue rating is the same as the corporate credit rating on Bumi as Standard & Poor's believes that the priority liabilities at Bumi's coal subsidiaries are unlikely to cause any structural subordination at Bumi, because of the limitation on the indebtedness and low level of other liabilities at the coal companies. Also, Standard & Poor's does not apply its subordination notching criteria to corporations that have operations in Indonesia, reflecting the difficulty in enforcing creditor rights under the country's legal system.
Bumi's financial risk profile is significant, with the current debt to EBTIDA slightly above 3.0x. The high debt burden is primarily due to its latest debt-funded investments in non-coal assets. The company plans to use proceeds from a proposed shares issuance and internal cash for its debt reduction. We expect Bumi to bring its debt to EBITDA to a more comfortable level of below 3.0x within the next 12 months.
Bumi is the largest producer and exporter of thermal coal in Indonesia with reserve life of about 40 years. However, Bumi's assets are located on Indonesia's Kalimantan Island, exposing the company to geographical and single mineral risk. The company's 10 largest customers accounted for about 48% of its sales in the fiscal year ended Dec. 31, 2009, leading to a sizeable customer concentration risk. These risks are balanced by Bumi's good-quality thermal coal reserves, favorable mining strip ratios and low cost profile.
In our opinion, Bumi's liquidity is adequate. As at June 30, 2010, the company had US$291 million of cash in hand and an additional US$124 million in restricted cash. Bumi's funds from operations (FFO) amounted to about US$246 million in the first half of fiscal 2010. We expect its FFO to be about US$600 million for fiscal 2010. The expected short-term debt payable in the next 12 months is about US$450 million. Bumi should be able to cover the near-term debt maturities with the internal cash flows and cash at hand. Bumi's relationships with the banks remain sound and its credit market standing is satisfactory. The company is expected to redeem about US$400 million of convertible bonds by the end of 2010. Bumi has stand-by credit facilities of about US$400 million to meet these convertible bond redemptions in case the proposed bond issuance fails.
In addition to the proposed notes, Bumi intends to issue shares to raise about US$350 million. The equity issuance will provide Bumi with additional liquidity. We view Bumi's foreign exchange risk as low, given that the company's revenues and the bulk of its costs and debt are denominated in U.S. dollar or linked to it.
As at June 30, 2010, Bumi was in compliance of required covenants and we expect it to remain in compliance going forward. However, if Bumi is unable to reduce debt or raise EBITDA, the headroom for its covenants will be limited starting December 2011, when the debt to EBITDA covenant steps down to 3.0x from 4.0x.
The stable outlook on the corporate credit rating reflects our view that Bumi's steady cash flow will be supported by growing demand for thermal coal and steady growth in company's production.
RELATED CRITERIA AND RESEARCH
-- Corporate Ratings Criteria 2008, published April 15, 2008.
-- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, published May 27, 2009.
((Bangalore Ratings Team, +91 80 4135 5415, Hotline: 4135 5898
RTRS-Indonesia's Bumi Resources plans dlr bond - source
11:52 29Sep10 RTRS-Indonesia's Bumi Resources plans dlr bond - source
HONG KONG, Sept 29 (Reuters) - Indonesian coal miner PT Bumi Resources PT plans a benchmark-sized dollar bond issue due in seven years and callable after four years, a source close to the deal said on Wednesday.
Credit Suisse Group AG Deutsche Bank AG and JPMorgan were hired for the planned issue, which could be priced as early as Wednesday or Thursday, the source said.
The company held a road show in Singapore, Hong Kong, New York and London.
Bumi last issued debt in November last year, when it sold $300 million of seven-year bonds with a coupon of 12 percent. (Reporting by Jun Ebias; Editing by Chris Lewis)
HONG KONG, Sept 29 (Reuters) - Indonesian coal miner PT Bumi Resources PT
Credit Suisse Group AG
The company held a road show in Singapore, Hong Kong, New York and London.
Bumi last issued debt in November last year, when it sold $300 million of seven-year bonds with a coupon of 12 percent. (Reporting by Jun Ebias; Editing by Chris Lewis)
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