Thursday, October 12, 2006

Bumi buyback: JSX' silentium magnum

I was wrong to indirectly predict the fall of PT Bumi Resources Tbk shares price following the collapse of US$3.2 billion divestment of KPC and Arutmin to Borneo Lumbung. In fact, Bumi price never droped to below Rp600 even though some said that time of black market price of Rp580. Why?

Because there were people defending the price. They 'collect' lot of shares. When Bumi secured US$1.2 billion funding, the management confirmed no fraction of the loan would be taken to buyback shares. I was also wrong to indirectly predict that, forget about the buyback Bumi promised. Creditors wouldn't allow that.
But this week, Bumi management announced the massive 1.9 billion shares buyback program, in a relatively short period of time, with maximum share price at Rp1,200 (vs the current price Rp760) which means Rp2.3 trillion (approx.US$250 million) using internally generated cash.
A reader sent the following email:
As you know, recent events surrounding Lapindo (and the previous intended merger between BUMI and ENRG) have led to significant selling pressure in Bakrie group stocks, including BUMI.)
Given that it is said that some of the company's loans are collateralized against the family's personal shares in BUMI, it is assumed that the Bakrie has been heavily supporting the share price at the Rp700-730 price level (to
the tune of hundreds of millions of shares).
BUMI's share buyback would perhaps be an opportune way of on-selling any of these recently purchased shares to the company... at a hefty profit? Is anybody looking into this possibility? Potential short term trading gains (especially if the stock rises significantly from here) could be enormous. Who was/were the big buyer(s) when the share price was under heavy selling pressure?

Unfortunately I have no Bloomberg terminal in front of me. (Poor Me, I took two semester to learn Bloomberg but no terminal back home????) But I think people know the answer. Readers who kind enough to do a little research with Bloomberg are free to contribute here!
PS: Don't expect JSX or Bapepam do that! They're in 'silentium magnum' period, always!

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Anonymous Anonymous said...

From Sep 8, the date the suspension was lifted, to Sep 28, Danatama Makmur was the largest buyer of Bumi. Danatama, which has close relations to Bakrie, bought 243 million shares at an average price of Rp 713. Beware though that when it comes to selling back the shares, they could use another broker.

October 12, 2006 4:30 PM  
Anonymous Anonymous said...

You're wrong to say that JSX won't do anything about it. As always, they have requested inquiries to any brokers involved on the BUMI trades. And mine being one of them. The (usual) question is: Will there be a follow up by the Ultimate Regulator of the capital market?

October 13, 2006 8:58 AM  
Anonymous Anonymous said...

Oh..oh..oh. KPC and Arutmin has severely delayed payment to contractor. So, this is one of the reason, BUMI needs cash for the share buyback.

October 15, 2006 9:24 AM  

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