We upgrade our recommendation on BUMI from Hold to BUY and put BUMI’s Target price back on its DCF valuation without any discount of Rp1.302. Higher investor’s risk appetite with huge liquidity on market justified our action to put BUMI’s on it’s normal valuation and ignoring corporate governance issues that already dimmed by now. With selling pressure easing and strong bullish momentum on Indonesian market, we believe BUMI will get the most beneficiary as investor start looking the cheapest stock available. BUY.
Higher Risk Appetite as the Main Catalyst on BUMI Shares
We believe, investor’s risk appetite currently are higher compared to last quarter on the back of optimism on bottoming global financial crisis and brighter outlook on economic recovery. This will become the main catalyst on BUMI’s shares on market as investor are become more eager to buy stocks, especially the cheapest one and ‘ignoring’ some risks behind it.
We believe, investor’s risk appetite currently are higher compared to last quarter on the back of optimism on bottoming global financial crisis and brighter outlook on economic recovery. This will become the main catalyst on BUMI’s shares on market as investor are become more eager to buy stocks, especially the cheapest one and ‘ignoring’ some risks behind it.
Highest Liquidity among Others
Compared to other peers, BUMI is the most liquid coal stocks on market with Ytd average turnover of Rp243 bn/day compared to peer’s average of just Rp60.8 bn/day. Even almost four times higher than its closest competitor of PTBA with only Rp64.6 bn/day. This should give BUMI the best leverage when market starts to entry the bullish path.
Compared to other peers, BUMI is the most liquid coal stocks on market with Ytd average turnover of Rp243 bn/day compared to peer’s average of just Rp60.8 bn/day. Even almost four times higher than its closest competitor of PTBA with only Rp64.6 bn/day. This should give BUMI the best leverage when market starts to entry the bullish path.
Best among the Under-owned Group
In our view, BUMI is the best asset in Bakrie Group portfolio and also the biggest weighted on BNBR’s earning. As we know, Bakrie group stocks had underperformed the market since Oct ’08 after BNBR announced its liquidity problems and result in a Repo Mess. Currently, those selling pressure are overdone as BNBR liquidity profiles had improved and the best will prevail.
In our view, BUMI is the best asset in Bakrie Group portfolio and also the biggest weighted on BNBR’s earning. As we know, Bakrie group stocks had underperformed the market since Oct ’08 after BNBR announced its liquidity problems and result in a Repo Mess. Currently, those selling pressure are overdone as BNBR liquidity profiles had improved and the best will prevail.
Don’t Forget the Dividend Offer
Even if we’re believe that this issues had mostly being factored in the market, but we are positive on BUMI’s huge dividend yield about 10% (Rp110/share) will be able to create a base on its price movement. Not many companies offer 10% dividend yield for fiscal year of 2008, even not those SOE’s.
Even if we’re believe that this issues had mostly being factored in the market, but we are positive on BUMI’s huge dividend yield about 10% (Rp110/share) will be able to create a base on its price movement. Not many companies offer 10% dividend yield for fiscal year of 2008, even not those SOE’s.
Valuation: Put BUMI back on its DCF Value of Rp1302
We eliminate our discount for BUMI’s DCF valuation and put our Target price of Rp1.302 using WACC of 14,1% and 0% LTG. Currently BUMI traded at F09 PE/PBV of 3.2x/1.4x and EV/EBITDA of only 2x. Other peers average valuation hovering at F09 PE/PBV of 5.3x/2.1x and EV/EBITDA of 2.9x. Evem with current rally on stock prices, BUMI still the cheapest among others with a lot of un-factored positive catalyst. BUY.
We eliminate our discount for BUMI’s DCF valuation and put our Target price of Rp1.302 using WACC of 14,1% and 0% LTG. Currently BUMI traded at F09 PE/PBV of 3.2x/1.4x and EV/EBITDA of only 2x. Other peers average valuation hovering at F09 PE/PBV of 5.3x/2.1x and EV/EBITDA of 2.9x. Evem with current rally on stock prices, BUMI still the cheapest among others with a lot of un-factored positive catalyst. BUY.
By Adrianus Bias Prasuryo
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