1Q25 Performance: Optically below NP, expect improvements ahead. BUMI booked in-line 1Q25 revenue of USD 349 mn (-19.4% QoQ; +12.1% YoY), 25.3% of our full-year estimate mainly driven by robust gold segment, which generated USD 62 mn (+203% YoY), offsetting lower coal revenue of USD 285 mn (-2.1% YoY). The drop in coal was mainly due to lower Arutmin ASP of USD 56.8 per ton (-2.1% YoY), while sales volumes remained flat at 4.8 mn tons (+0.4% YoY). On its bottom line, BUMI’s 1Q25 net profit of USD 18 mn (-73.6% YoY) was short of our forecast (13.7%) caused by: 1) asset disposal loss of USD 7.6 mn, and 2) lower associate income of USD 9 mn (-58.3% YoY),  primarily on declined KPC sales volumes to 11.9 mn tons (-11.9% YoY), and lower ASP of USD 68.2 per ton (-16.9% YoY). Looking ahead, we expect BUMI’s earnings in May and beyond to catch up to our estimates helped by April’s new royalty scheme.

 

Lower royalty rate to 19% to offset lower below the line performance. Through PP 19/2025, the government recently revised royalty structures for coal and minerals. Notably, coal miners operating under IUPK as a continuation of CCoW will receive major royalty rate cut to 19% from 28%. Based on our calculation, BUMI stands to benefit the most amongst our coal coverage; hence, our earnings post 1Q25 results remain unchanged as we expect 2Q-4Q25 to experience 76.5% YoY growth on the back of the lower royalty rate.

 

Positive catalysts stemming from diversification initiatives in 2Q25. Post-debt clearance, BUMI has initiated strategic diversification away from its coal business. The company is currently in talks to acquire: 1) bauxite mine and alumina plant in West Kalimantan, and 2) gold mine in Australia. To finance these acquisitions, the company will use a combination of debt and internal cash (Low 1Q25 net gearing: 7.9%). In 2Q25, BUMI plans to provide updates on these projects, which we expect to create positive catalysts for the stock.

 

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BUY with IDR 170 TP on Quasi-reorganization as another positive catalyst.  We reiterate BUY on BUMI with SOTP-based target price of IDR 170, reflecting 25F EV/Resource 0.6x and 45.3% upside. At the moment, BUMI is awaiting OJK’s approval, expected in the next six weeks, for its quasi-reorganization plan to allow dividend distribution ahead, although DPR remains undisclosed at this stage. We believe the plan is likely to be approved, as its average net income over the past three years has met the 10x equity deficit requirement. This coupled with BUMI’s potential re-rating from its diversification into metal mining has us maintaining our positive view on the stock. Risk to our call include: 1) lower-than expected coal prices, 2) regulatory changes & 3) execution risks.