Buyback slows Bumi's stock decline

IDX-listed coal mining house PT Bumi Resources managed to slow its price slide Friday thanks to its buyback plan, although selling pressure is likely to continue until after the buyback is complete, analysts say.

The Bumi stock price fell by 1.69 percent to Rp 1,160, retreating from an earlier gain of up to 10 percent. The decline was much less than the average drop of nearly 10 percent in each of the previous six trading days, The Jakarta Post reported on Saturday.

The buyback plan must have had a lot to do with it, according to independent stock market analyst Yanuar Rizky and Indonesian Securities? Investors Society chairman N.D. Murdani.

Bumi, the most prized unit of Bakrie & Brothers, which is controlled by the family of the people?s welfare minister Aburizal Bakrie, announced Thursday it would spend Rp 25 trillion (US$696 million) to buy back shares at Rp 2,500 a share, more than double the current level.

The repurchase plan, which should secure 17 percent of the company?s outstanding shares, is designed to bolster its share performance, with its value plummeting by nearly 50 percent since its trading suspension was lifted on Nov. 6.

To partly finance that short fall, Bumi will sell Rp 6 trillion worth of medium-term notes backed by shares in Bumi. The notes will yield 25 percent and mature in a year, Bloomberg reported, quoting the sale arranger.

That is a higher return than from the 13.19 percent interest rate that banks pay to borrow from one another for one year.

Bakrie is in the process of selling its 35 percent stake in Bumi, and shares in other units, to raise fresh funds to help accelerate the payment of debts backed by shares of its units to limit a dilution following the heavy battering of its units? share prices.

The group is in talks with a consortium led by Northstar Equity Partners to finalize the purchase deal. Bakrie may sell up to a 20 percent stake in PT Energi Mega Persada (EMP), another unit, to Brentwood Ventures Pte, it said in a statement to the Indonesia Stock Exchange, adding that talks were underway.

EMP has a 50 percent stake in a huge Kangean gas block.

Selling pressure is likely to persist until signs of the buyback plan materialize, analysts said.

?Investors are waiting for the company?s move (to execute the buyback plan). It?s like proving they can provide money for the buyback, or starting the buyback step by step even in small amounts,? Murdani said.

?It would be misleading in formation for investors if the company can?t prove they are able to do this.?

Meanwhile, Vice President Jusuf Kalla has strongly denied claims the government is giving special treatment to help the Bakrie Group, the country?s richest business empire, with Aburizal playing a role as a key financier of the incumbents during the 2004 presidential campaign. (*)