PT BUMI RESOURCES, Tbk
by sir William Chen
PT Bumi Resources, tbk was known as the biggest coal mining in Indonesia. In 1990, the company applied it first Initial Public Offering (IPO), fully listed it shares in Jakarta and Surabaya. It was registered on stock exchange of Indonesia (IDX) with a code as “BUMI”.
Previously BUMI was named as PT Bumi Modern, tbk which is a domestic investment company (PMDN). Under this name the company carried it diversification activities that mainly functioning in Hotel and Tourism Industry. The company found it difficulties in tourism business, which in turn the shareholders extraordinary meeting on August 13, 1998 proposed that the company has completely turned its core business into oil, natural gas, and mining company.
Upon the change of its core business, on September 20, 2000 the company has altered its name from PT Bumi Modern Tbk. became PT BUMI Resources Tbk. Since it changed its core business, the company made progressive acquisition activities. Firstly it acquired Gallo Oil (Jersey) Ltd in 2000. BUMI continued its expansion in 2001 by acquired 80% of PT Arutmin Indonesia (Arutmin) from BHP Minerals Exploration Inc. In April 2004, the Company acquired 19.99% shares of Arutmin from PT Ekakarsa Yasakarya Indonesia. As a result, the Company’s ownership in Arutmin became 99.99%. Lastly In December 2005, BUMI Resources finalized the divestment of the shares of PT Kaltim Prima Coal (KPC) pursuant to Article 26 of the Coal Contract of Work (CCOW). As a result the share ownership of the Company in KPC, directly and indirectly, amounted to 95%.
The company has the following business structure with its subsidiaries:
Source: PT Bumresources, tbk (2008) “ Corporate Info”
Below is BUMI top 5 shareholders information:
| NO. | NAME | ADDRESS | TOTAL SHARES | % |
| 1 | BANK OF NEW YORK QQ WILLOW FINANCE LIMITED | C/O BANK DANAMON INDONESIA Tbk, PT GD MENARA BANK DANAMON JL. PROF DR STARIO | 3,475,655,492.00 | 17.91 |
| 2 | CREDIT SUISSE SINGAPORE BRANCH S/A CMA PTE LTD-BUMI | C/O BUT. STANDART CHARTERED BANK ATRIA SQUARE JL. JEND. SUDIRMAN KAV 33A | 1,536,120,006.00 | 7.92 |
| 3 | CREDIT SUISSE SINGAPORE BRANCH S/A PT BUMI RESOURCES - BUMI | 1 RAFFLES LINK #03/#04-01 SOUTH LOBBY SINGAPORE 03939 C/O STANDARD CHARTERED BANK JAKARTA | 1,364,966,000.00 | 7.03 |
| 4 | JIMBA FINANCE LIMITED 96537-4000 | C/ODEUTSCHE BANK AG, GEDUNG DEUTSCHE BANK LT. 4 JL. IMAM BONJOL NO. 80 | 813,868,813.00 | 4.19 |
| 5 | HSBC BK PLC S/A PRUDENTIAL ASSURANCE COMPANY LIMITED | MENARA MULIA, 19TH FLOOR, JL. JEND. GATOT SUBROTO KAV. 9-11, JAKARTA 12930 | 760,932,000.00 | 3.92 |
| 6 | PUBLIC | | 12,266,326,502 | 63.22 |
| | 19,404,000,000 | 100.00 | ||
The company mainly production is in exploration, mining, manufacturing, producing and marketing of coal mine. The group produces bituminous coal, sub-bituminous, and Ecocaol. Its coal processing activities consist of coal crushing and coal washing. Coal prices recently are swinging up high till US$140 (till May 2008) due to it was the alternative energy for crude oil. BUMI is the 1st coal miner in Indonesia and it was export oriented company. With this high price the company can secure its advantage for profitability.
BUMI financial statement for the year 2002 to 2006 as shown in appendix indicates their operation is well run and in strong position from year to year. However the data alone did not exploit BUMI real increment from year to year. The high profit might due to inflationary effect rather than good operation inside. It is important to analyze the company using financial statement analysis on ratios and common-size statement to find out trend movement in BUMI operation.
The company also considers its shareholders value as they deliver a good value for stockholders returns. The company stock movement until 30 April 2008 as follows:
Source: YahooFinance (2008), “Basic Chart”
Within the company good performance, BUMI distribute some of its profit in term of dividends as follows
| YEAR | DIVIDENDS (Rp/share) |
| 14 August 2003 | 2.5 |
| 10 August 2005 | 5.0 |
| 3 June 2006 | 10.0 |
| 29 August 2007 | 82.0 |
The company stock in 3 Jan 2003 is only Rp 25; 4 Dec 2004 at Rp 800; 5 Dec 2005 is Rp 760; 6 Dec 2006 at Rp 900; and 7 Dec 2007 is Rp 6,000. Additionally, they also pledge to increase its dividend in the following year after 2007 to increase by 7% continuously. However different shareholders might require different required rate of return if they want to decide invest in BUMI stock. Their required rate can be divided into whether they are aggressive, moderate or conservative investors as shown below:
| CATEGORY | REQUIRED RETURNS |
| Conservative | 10% |
| Moderate | 20% |
| Aggressive | 30% |
For year 2008, the company proposes to give high dividend but not finalized by the board of directors. Currently BUMI stock traded at Rp 8,000. The board assumed it was important to analyze the dividend demanded for the three types of investors before final dividends pay out.
For 2008, the company has many corporate plans to improve the company performance. One of it was through issuance of corporate bond, which the company willing to obtain more funds for their expansion plans. The corporate consider issuing a bond with a par value of $1,000, with a coupon rate of $80 that paid annually. The plan will help the company to obtain US$ 1 billion that BUMI will issue it globally. At current, the market is very uncertain inflation might be high, interest rate may increase. This in turn will affect the company bond issuance. The company is willing to make an analysis on price changes in bond affected by interest rate and maturity date. The current interest rate is 8.25%, which the company wishes to analyze if it +/- 1% ranges. Additionally the company plans to decide its maturity in 1- 10 year.
REQUIRED:
1. Discuss with reference to the fact; whether the company is in good fundamental position and its target share price at the end of the year 2008 (max 1000 words)!
2. Make an analysis for the price of bond in term of rate (7.25%, 8.25%, and 9.25%) and maturity year (1 to 10)! Draw the chart!
3. From your calculation in Q2 what is your suggestions for its bond!
4. Prepare common size income statement!
5. Refers to Appendix 1 calculate the following ratio for the year 2002 to 2006 (working are not required):
a. Profitability (return on total equity, return on assets, cash flow to sale, COGS to sale, Gross profit margin, operating profit margin, net margin)
b. Assets utilization (assets turnover, inventory turnover, net sale to gross fixed assets)
c. Leverage (total debt / common equity, total debt / total assets, dividend payout, cash dividend coverage ratio, fixed assets / common equity)
d. Liquidity (quick ratio, current ratio, receivable / current assets, inventories / current assets, days in account receivables, days in inventory)
6. Comment the significant finding from the above data (Qs5)!
7. Analyze the company stock prices based on three types of investors for the year 2002, 2003, 2004, 2005, and 2006, draw the chart! Pg 244 for formula
8. Compute the dividend required for 2008 at price 8,000 from three types of investors!
~~~ END of ASSIGNMENT~~~
REFERENCES:
- Trimegah (2008), “Stock Quotation”, cited on
http://www.trimegah.com/quotes.cfm?Quotes=bumi
- PT Bumresources, tbk (2008) “ BumiResources” cited on http://www.bumiresources.com
- Worldscope (2008), “Bumi”, cited on
http://tobsefin1.swlearning.com:8891/ta/?ExpressCode=tlbasic
- Bloomberg (2008), “Stock Quotation – BUMI”, cited on
http://www.bloomberg.com/apps/quote?ticker=BUMI:IJ
- Jones P.C. (2002) “Investment analysis and management”, John Wiley and Sons
- Ross A, Randolf W. W, Jordan B.D (2008), “The fundamental of corporate finance”, 8 eds., McGraw Hill
7. YahooFinance (2008), “Basic Chart” cited on
http://uk.finance.yahoo.com/q/bc?s=BUMI.JK
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