Merrill cuts Bumi earnings forecast

Merrill cuts Bumi earnings forecast

JAKARTA: PT Bumi Resources, Indonesia's biggest coal exporter, had its earnings estimate cut by Merrill Lynch & Co. after the brokerage lowered its forecast for thermal coal used to generate electricity.

Merrill cut its 2006 earnings forecast for Bumi by 21 percent to Rp 126.51 (1.3 U.S. cents) and its 2007 forecast by 20 percent to Rp 119.75, in an e-mailed report on Friday. It maintained its 2005 forecast of Rp 115.94.

Bumi became Indonesia's largest coal producer and exporter after acquiring two coal mines this decade. The brokerage cut its coal price forecasts for 2006 by 19 percent to $43 a metric ton and its 2007 forecast by 7 percent to $40 a ton.

"The revision was driven entirely by the lowering of our thermal coal price assumption," the report said.

Merrill maintained a "buy" call on the stock with a target of Rp 1,350 in 12 months, cut from an earlier target of Rp 1,425, the report said. The shares have fallen 2.5 percent since the year started to Rp 780.

The brokerage said it expects "a significant growth in Indonesia's coal-based power generating capacity," which may benefit Bumi if it wins new supply contracts, the report said. -- Bloomberg