JAKARTA. PT Bumi Resources Tbk (BUMI) plans to issue new shares with pre-emptive rights in 2017. This is the part of the company’ conversion of debt into shares.
Financial Director of BUMI Christopher Bechkam said, the company will issue a total of 29.1 billion shares. This equal to 80% of issued and paid up capital of BUMI, which amounted to 36.6 billion shares.
In accordance with the proposal for debt restructuring, BUMI set the price of Rp 926 per a new share. This is much higher than the current price of Rp 294 per a BUMI’s share.
Andrew claimed that the price of the new shares is reasonable, as it was estimated based on BUMI’s net asset value (NAV) , which amounts to US$ 4.6 billion. It is expected that BUMI will obtain Rp 26.9 trillion funds through the jumbo right issue.
The number of BUMI’s shares will skyrocket to 65.7 billion through the issuance of the new shares. Therefore, according to Andrew, the corporate action will increase the market capitalization of BUMI.
Prospect of BUMI
To date, the value of BUMI’s market capitalization or market cap is Rp 11 trillion. Management of BUMI estimates that theoretically, market cap of BUMI after the rights issue will skyrocket to Rp 38 trillion. “Meanwhile, the theoretical price will be Rp 580 per share,” Andrew said, Thursday (8/12).
In the future, BUMI will still offer the new shares to existing shareholders, or the new shares will be taken by the creditors, in accordance with the scheme of postponement of debt payment obligations.To date, China Investment Corporation (CIC) and public control 16.9% and 83.1% of BUMI’s shares, respectively.
The public’s shares will be diluted after the rights issue. If all the debts are converted to shares, at least nine creditors will occupy the shares of BUMI. In this case, CIC will obtain 22% of BUMI’s shares after the right issue.
BUMI will issue the rights before 30 June 2017. BUMI will just propose the plan for rights issue to Financial Service Authority (FSA) in January 2017. Therefore, BUMI can hold extraordinary general meeting of shareholders in either April or May 2017.
Andrew said, after the rights issue the creditors will be allowed appoint three of their representatives as the directors of BUMI. Therefore, BUMI will have seven directors after the rights issue. In addition to the directors, the creditors also can appoint three representatives as BUMI’s commissioners.
Aside of issuing rights, BUMI also plans to issue the mandatory convertible bonds with a 6% interest rate per year and will mature in the next seven years.
Analyst at Binaartha Parama Reza Priyambada estimated, after the rights issue, the theoretical price of BUMI may reach Rp 500 and Rp 600 per share. BUMI’s shares are potentially to increase so that the investors may reap profits through trading in a short time. “Despite of dilution, the public’s shares remain large,” he said.
Reza recommends ‘speculative buy’ for the shares of BUMI. If the price of a BUMI’s share remains at Rp 278- Rp 280, the share price potentially to increase to Rp 310-Rp 330 in a short term. On Thursday (8/12), the price of a share of BUMI dropped to Rp 294. (Muhammad Farid/Translator)
BUMI Ready to Right Issue in 2017
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