No change stake in Bumi Resources Minerals Tbk (BRMS) as of September 2012

Bumi Resources: No change stake in BRMS as of September 2012

• Company’s disclosure - In response to this morning news about BUMI’s change stakes in BRMS from 87% to 45%, Company has clarified and confirmed officially that BUMI IJ still controlled 87% stake at BRMS AS OF September 2012. Management of the company did not want to give further comment and did not want to speculate on the news, despite the registered file to Idx has clearly showed that BUMI’s ownership in BRMS was reported only at 45%.
• Our take - Based on our channel check and market talks, there was a high possibility of doing repurchase agreement or “repo” between Bakrie Group with several investors on BRMS shares. And repo rate at this current condition for Bakrie Group should be very expensive in our view. A repo is economically similar to secured loan, where the seller is effectively the borrower. As we dig further, accounting wise, repo may not change the company’s ownership structure as it depends on the essence of the transaction.
• However, the INTERESTING QUESTION and our CONCERN are :

1. Company’s announcement is focusing the stake ownership AS OF September 2012 while the registered file from the berau administration (custody) reported ownership AS OF 25th February 2013. Repo is “off balance sheet” term where the ownership of BRMS should remain under BUMI IJ unless there’s a DEFAULT.  The file registered to IDX (above) clearly showed that the ownership has effectively transferred to other parties and BUMI IJ as of February 2013 only owns 45% stake at BRMS, raising QUESTION about the repo status whether is still current or default. In fact, we have seen that BRMS share has been under pressured couple days before the file registered to idx announced.
2. IF the REPO transaction TRUE, then WHERE DOES THE MONEY GO? Should it go into BUMI’s balance sheet to support its operational or debt repayment? Or should it go to Bakrie Family? The answer will be seen in the FY12 audited results. IF the money goes to Bakrie Families, then BUMI should record affiliated party A/R (receivables) as a LOAN to shareholder and would definitely bring more negative sentiment toward BUMI share.

Back in November  2009, BUMI and Bukit Mutiara entered in agreement to grant loan up to US$300mn in 2009 with IRR 19% and until now it still stays at BUMI’s balance sheet as a long term receivables with lack of clarity on the status as it has been renewed until 2015.

Related article: Market News Jakarta Feb 25 2013

Indomobil Sukses Internasional More details on the new modified Evalia

Indomobil Sukses Internasional: More details on the new modified Evalia (IMAS, Buy, Rp5,400, TP: Rp6,550)

Subsequent to our yesterday’s comment on the newly launched modified Nissan Evalia, Nissan Motor Indonesia sent a press release detailing the specifications and prices. The company officially refreshes the existing SV model with additional new features and launches St model as a new line-up, aimed to provide better comfort at an affordable prices.

The SV variant – Nissan refreshed this model by refining its seat back material and installing an additional rear cooler and flush window. Previously, rear cooler and flush window can only be found in the highest XV variant. Based on our observations, prices are slightly raised by Rp10mn to Rp172mn for manual transmission (from Rp162mn) and Rp182mn for the automatic transmission (from Rp172mn). These imply a 5.8-6.2% increase, which is justifiable given Rupiah depreciation and rising raw material prices. For the high-end XV type, Nissan also raised the price to Rp182mn for the manual transmission (from Rp175mn) and Rp192mn for the automatic transmission (from Rp185mn)

The St variant – This variant is totally a new line-up, which we believe is used as a strategy to tap lower-end consumer segment with better features as compared to the lowest S segment that is being targeted for corporations. The features offered include power window, third row head rest, seat leg cover, inside door handle finisher, seat back material, and rear cooler air conditioning system. Offered in a manual transmission, Nissan priced this variant at Rp155mn, about 6% more expensive than the lowest-end variant but 10% cheaper than the manual transmission SV type.

No price increase for low-end model – In the new price list, we note that Nissan has increased selling prices by 4.9% on average (range: 3.8-6.2%), but not for the lowest-end S type that is relatively unchanged at Rp146mn (previous price: Rp145mn). We believe this is part of Nissan’s strategy in tapping the lucrative corporate segments, which believed to account for about one-third of the total domestic 4W sales.

Recommendation – Our forecast assumes 2,000 units of Evalia sales per month, yielding annual sales of 24,000 units for this year, forming 30% of our total 79,900 units of Nissan sales. For every 1,000 units additional Evalia sales per year, we estimate a 0.8% increase in IMAS’ EPS. At the moment, we have a Buy call with Rp6,550/share target price. IMAS would release 4Q12 results this month, which we think may not be as strong. Ramping-up 1Q13 sales would be the catalyst, in our view. IMAS now trades at 12.3x FY13F PE.

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