Last night our staff went to the dinner at Four Seasons Jakarta for the official closure of the Bakrie-Rothschild deal. This follows Friday's purchase of 75% of Berau by Vallar and the earlier purchase of 25% in Bumi. Vallar (VAA LN) will be renamed Bumi Plc on May 10.
Some key takeaways:
* Bakrie group is understandably very pleased to have closed the deal; they see this as the internationalization of the group.
* They have been speaking to institutional investors to swap their shares in Bumi for Vallar. Indicative terms are 57.7 BUMI sh for 1 VAA sh, according to local press which at current VAA price translates into a swap price of Rp3150/sh.
* They could do a preemptive placement of 10% in Bumi to repay the debt and swap the shares into VAA shares.
* They now want to lift VAA's stake in Bumi to 40%+ (from 25%) and hope to complete this in May this year.
* Separately, the group has said it wants to repay $375m of convertible debt this year plus $600m of the first tranche of expensive CIC debt in Oct.
* The group sees itself producing 140mt of thermal coal by 2013; a bit ambitious in our view given production constraints but their conveyor-based infrastructure gives the group a real cost advantage over those who rely on trucking the coal out from the pit.
We like BUMI. BUY with TP of Rp4,000.
Some key takeaways:
* Bakrie group is understandably very pleased to have closed the deal; they see this as the internationalization of the group.
* They have been speaking to institutional investors to swap their shares in Bumi for Vallar. Indicative terms are 57.7 BUMI sh for 1 VAA sh, according to local press which at current VAA price translates into a swap price of Rp3150/sh.
* They could do a preemptive placement of 10% in Bumi to repay the debt and swap the shares into VAA shares.
* They now want to lift VAA's stake in Bumi to 40%+ (from 25%) and hope to complete this in May this year.
* Separately, the group has said it wants to repay $375m of convertible debt this year plus $600m of the first tranche of expensive CIC debt in Oct.
* The group sees itself producing 140mt of thermal coal by 2013; a bit ambitious in our view given production constraints but their conveyor-based infrastructure gives the group a real cost advantage over those who rely on trucking the coal out from the pit.
We like BUMI. BUY with TP of Rp4,000.
source: CLSA