Tenggara Strategics, Jakarta – Long dumped and shunned by investors, publicly listed coal miner PT Bumi Resources Tbk (BUMI), one of the largest mining companies associated with politically connected the Bakrie Group, is once again becoming a target of investors in the stock market following the entrance of the country's premier conglomerate the Salim Group.
Once the darling of investors and the largest-listed company on the Indonesian Stock Exchange (IDX), BUMI has been part of the Bakrie Group's long entanglement with various controversies and massive debt, which resulted in BUMI share prices going down from their record high of Rp 8,750 per share in August 2012 to the lowest level of Rp 50 in 2020. Prices stayed at that level for sometimes before finally going back up, especially after news of Salim's planned entrance into BUMI. BUMI rose to Rp 167 per share at Wednesday's close.
Salim entered BUMI through a private placement worth Rp 24 trillion (US$1.6 billion) on Tuesday, in which BUMI issued 200 billion new shares on top of its existing 143.8 billion shares. After the private placement, both Salim and Bakrie became the controlling shareholders and BUMI became the number-two company in the IDX with the largest number of floated shares, just after PT Gojek Tokopedia (GOTO), which floated 1.13 trillion shares.
Salim acquired BUMI through Hong Kong-based March Energy (Hong Kong) Limited (MEL) and Singapore-based Treasure Global Investment Limited (TGIL). MEL purchased 170 billion of the newly issued shares or 85 percent, while TGIL bought the remaining 30 billion shares at Rp 120 per share.
MEL is 42.5 percent owned by PT Bakrie Capital Indonesia (BCI), 42.5 percent by March Energy (Singapore) Pte Ltd (MPEL) and 15 percent by Agoes Projosasmito. MPEL is 100 percent controlled by Salim, while Agoes is a confidant of Anthony Salim, chairman of the Salim Group. TGIL, meanwhile, is 83.85 percent controlled by MPEL and 16.15 percent by Agoes through PT Aswana Pinasthika.
Before entering into BUMI, Salim first acquired BUMI subsidiary, publicly listed gold miner Bumi Resources Minerals (BRMS) earlier this year. BRMS' purchase by Salim has been a boon for the company's stock price too, which surged from below Rp 100 per share last year to over Rp 200 per share, although recently its stock price was corrected to close at Rp 173 on Wednesday.
Market players described such a sharp increase as Salim effect – that is to say, when Salim enters into a listed company, its share prices would boost. Whether the Salim effect would work on BUMI would remain to be seen. At least, following the private placement, the heavily indebted BUMI said in a statement that "all the remaining debt under the debt-suspension petition (PKPU) have been settled and paid in cash". But it did not say how much debt it has paid out. As of end of 2021, BUMI recorded a total asset of US$4.2 billion, of which $3.57 billion was in the form of debt. Of the total debt, $2.88 billion was short term.
What's more
BUMI booked $3.8 billion in revenue in the first half of this year, up 66 percent from $1.5 billion in the previous year. The revenue increased significantly even though production and sales volumes decreased by 14 percent and 16 percent, respectively, over the same period due to frequent heavy rain disrupting operations.
BUMI saw its cost of revenue grow 50 percent yoy to $2.7 billion "due largely to spiraling fuel prices". Nevertheless, BUMI's net income shot up to $167.7 million in the first half, up 8,726 percent year-on-year (yoy) from $1.9 million in the corresponding period last year. Skyrocketing coal prices in the global market greatly boosted the company's profit margins.
Prices for thermal coal – which power plants burn to generate electricity – have more than doubled over the past year. Tracking that trend, Indonesia's benchmark coal price (HBA) hit $323.9 per ton in June, the highest-ever since the Energy and Mineral Resources Ministry began recording the HBA in 2009, energy ministry data show.
Thermal coal prices have been rising this year as diminished supplies – because of flooding in Indonesia and Australia – failed to match surging global demand as economies worldwide reopened following pandemic-induced activity restrictions. Analysts expect coal prices to remain high as the European Union's decision not to import coal from Russia sapped supply, while China's heat wave spurred demand.
What we've heard
One of the securities companies explains that not long after the Salim group bought Bumi Resource Mineral (BRMS), news came out in the stock market that the investment wasn't the ultimate deal from Salim. "From the beginning, what they were aiming for was BUMI," said the source.
A different source adds that Salim's entrance to two of Bakrie group's stocks is related to the lobbying efforts of some of Bakrie's high-ranking members offering the stock to Salim. "On the other hand, Bakrie needs to pay off their suspension of debt payment obligations (PKPU) of US$1.56 billion, they're desperate for a fund injection," said the source.
From the point of view of several market actors, the reason Salim wants Bakrie stocks are because Salim has been increasing their presence in the stock market for the last two years- starting from PT DCI Indonesia Tbk (DCII), Bank Mega along with smaller banks claimed digitally, and finally Bakrie. To the point that a common joke in the market nowadays is "where there's noise in the stock market, there's Salim." Lately, Salim has also been trying to purchase WIR Asia (WIRG) stocks. "There's a theory that Salim has been searching for money from stocks that recently hit retail."
However, there's a counter argument to that theory. One of the stock market players have noticed that the stocks bought by Salim are not the ones being eyed by other large institutional investors, such as Ashmore, Manulife or pension funds. So it is not only because coal companies are on the rise due to the Russia-Ukraine war. From BUMI's point of view, they only want financing to pay their debts. Meanwhile Salim's collection of Bakrie's stocks, from PT Bakrie & Brothets Tbk (BNBR), BRMS, BUMI to PT Energi Mega Persada Tbk (ENRG), is improving the sentiment towards Bakrie's other stocks. "Thanks to Salim, Bakrie stocks are on the rise again," he said.
The rise of these stocks is expected to increase the valuation of VKTR Teknologi Mobilitas, a subsidiary of Bakrie in the field of electric busses, charging stations and electric motorcycles that are rumored to be considering to IPO in the near future.