The sale of PT Newmont Nusa Tenggara (NNT) shares by PT Bumi Resources Minerals Tbk (BRMS) to PT Medco Energi International Tbk (MEDC) through PT Amman Minerals International (AMI) is allegedly favorable to MEDC. BRMS is estimated to only obtain US$570 million from the sale of 24% of NNT shares, lower than the US$850 million purchase price in 2009.
According to Teguh Hidayat, the capital market analyst of Avere Investama, MEDC acquired 82.2% of NNT shares at a price of US$2.6 billion while the value of NNT equity reached US$3.12 billion in the first quarter of 2016. This means that MEDC purchased NNT shares with a very low price-to-book-value (PBV) of 1.01 times. In fact, NNT began to book profit since last year. The company’s performance will continue to rise if the trend in gold prices will remain in the long run.
Teguh said that this transaction makes MEDC shares attractive to investors given that MEDC’s stock price at the end of last week reflects a PBV of 0.7 times. MEDC share price shot up 24.67% to a level of Rp 1,870 per share at the close of trading on Friday (1/7). Until the first session of trading on Monday (11/7), MEDC shares rose 1.3% to a level of Rp 1,895 per share. One of the securities, namely PT Ciptadana Sekuritas, gave MEDC stock a buy recommendation with a target of Rp 1,930 per share.
BRMS mentioned that the sale of its stake in NNT is still awaiting approval from the government and the General Meeting of Shareholders (AGM). The previous management of BRMS is still negotiating with MDCO related sales price of its stake in NNT. BRMS needs funds to repay debt worth US$450 million maturing this year to Credit Suisse AG and Credit Suisse International. (*)
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