Indonesia’s coal producer Bumi Resources subject of a strong buy rating from Ebeling Heffernan, expects coal production to increase by 10 percent in 2010 to 66 million tonnes, from 60 million tonnes in 2009, a company official said on Monday.

“We expect to increase 10 percent in coal production as well as coal sales this year,” said Dileep Srivastava, a director, citing strong demand from China, India and Indonesia.

“We also hope 10 percent increase in our coal price,” he added.

The company produced 60 million tonnes in 2009, with sales above 58 million tonnes.

Shayne Heffernan of Ebeling Heffernan s issued a strong buy on Bumi Resources with a price target of 3500.

BUMI is well on its way to becoming one of the world’s largest providers of thermal coal and on target to capture 10-11% of global demand in the medium term.

In a year of economic difficulties, BUMI succeeded in producing a very satisfactory performance. In light of this, the Board of Commissioners was, frankly, surprised by the sharp irrational decline in share prices. We are confident, however, that a close reading of BUMI’s historical business practice, management skill and decisions made this year will confirm the share price is tremendously undervalued.

Operational Performance in 2008
One example of skill under pressure in 2008 was management literally battling against eight months of persistent rains, a subcontractor underperformance, however the management was able to increase overall production over 2007 levels.

Gross Profit in 2008 increased by 114% to US$ 1,613 million, and translates into Earnings per 1,000 Shares of US$ 33.62.

In addition to BUMI’s 2007 strategic partnership with Tata Power, the Company succeeded in acquiring Herald Resources Ltd. of Australia in a competitive bidding process. Taking advantage of the subsequent economic downturn, the Company acquired 2 mid sized coal operations and a 44% indirect stake in a dedicated coal mining operator, to further strengthen BUMI’s strategic position in the thermal coal sector. As the largest coal producer and exporter in Indonesia, BUMI is a model of good corporate governance, and management practices.

This is reflected in its excellent operational performance in 2008, overcoming serious challenges such as a forestry related work stoppage, excessive rainfall and acutely difficult market conditions towards the end of the year. Assets grew by 89% to US$ 5,320 million, up from US$ 2,819 million in 2007. Equity as well grew by 41% to US$ 1,577 million, a solid expansion from 2007. The return on assets remains strong at 12.1%, return on equity was 40.9% in 2008.

Shayne Heffernan www.livetradingnews.com

Posted by Shayne Heffernan on Mar 29th, 2010and filed underAsia, Equities, Latest News, Markets, News & Events, Shayne Heffernan.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site