In a research note published this morning analysts at Nomura have sharply downgraded their view of London-listed diversified Indonesian miner Bumi plc to reflect the short-term distressed nature of the company´s finances following its recent corporate governance travails.
To use their own words: "In the short term, the market is also likely to focus on credit concerns at 29% associate PT Bumi.
Loans from PT Bumi to ReCapital of approximately $340m have yet to be repaid, adding to the group's balance sheet issues. PT Bumi had circa $4.1bn in gross debt and $230m in gross cash at the end of the first half of 2012. We estimate that PT Bumi needs an average Newcastle thermal coal price of over $ 95/tone (versus spot of approximately $87/tonne) to cover its estimated 2013 interest expense."
As well, points out Nomura: "Concerns have resurfaced around the Bakrie's (24% shareholder in Bumi plc) $440m Credit Suisse debt facility. PT Bakrie's entire shareholding in Bumi plc is pledged against the loan. This has led to concern in the market that failure to repay or top up the facility could create additional uncertainty for the group."
Due to all of the above Nomura has seen fit to downgrade shares
of Bumi to Reduce (from Neutral), while at the same time lowering their target price to 175p from 750p, as they have changed their valuation methodology to 0.5 times price/net-present-value at spot commodity prices to reflect the distressed nature of PT Bumi.
Analysts at Seymour Pierce have weighed in this morning on laundry and pest control conglomerate Rentokil´s acquisition of the assets of Western Exterminator Company, the third acquisition this year since the company announced its strategy of expanding its global pest control business and by far its most significant.
The broker says: "We think the deal makes sense for Rentokil, increasing its footprint in the North American market (the single largest pest control market valued at circa £4.4bn) but financially the acquisition will only prove viable if Rentokil management can significantly improve the profitability of the acquired business.
Lastly, they point out that: "on our current numbers the shares are trading on a prospective price-to-earnings of 10.2x which sounds about right to us given the ongoing problems in its parcel delivery business. Upcoming news: 3Q pre close trading update on November 9th. We reiterate our HOLD recommendation with an 80p target price."
Analysts at Credit Suisse have issued what at first glance seems like a rather dismissive research note on this morning´s FT article according to which Singapore investment fund Temasek has sounded out potential buyers for its 6bn pound stake in Standard Chartered.
In this regard, they comment that: "This is not the first time that we have seen this type of story, although whether or not a transaction happens we think it may create a debate."
On the other hand, they make three "observations" which may be of interest and, for the most part, would seem to point in precisely the opposite direction. These are: [Credit Suisse believes] Temasek has been trying to shift away from financials towards commodities and other sectors, at the AGM this year they did not support the elections of all the executive directors and given the prominence of the stake for Temasek this could also be interpreted as a negative indicator of their expectations for the group.