JP Morgan Cazenove slashes target for Bumi price amid investigation into Indonesian arm

ANALYSTS at JP Morgan Cazenove, which advised Bumi on its float, have downgraded their target price for the firm to 100p a share.

JP Morgan said that Bumi Resources, the Indonesian arm of the business that is 29 per cent owned by London-listed Bumi, could be forced to turn to the capital markets for funding to shore up its balance sheet.

Standard & Poor’s yesterday also moved to cast doubt on the troubled Indonesian firm, and cut Bumi Resources’ credit rating by one notch to B plus.

On Monday Bumi, founded by financier Nat Rothschild, appointed City law firm Macfarlanes to investigate alleged financial irregularities at the Indonesian business. The inquiry is expected to look into the development funds, which focus on infrastructure.

A source close to Bumi told City A.M. yesterday that it couldn’t make any decisions regarding Bumi Resources, which includes some valuable Indonesian coal assets, until the investigation is completed. It is understood it could be a couple of weeks before any conclusions could be drawn.

Indonesian-based Bumi Resources, part-owned by the influential Bakrie family, said in a statement yesterday it would act as swiftly as possible to resolve the allegations, adding it would comply with all its obligations under Indonesian law.

Bumi Resources’ chief executive Ari Hudaya stepped down from the London-listed firm’s board just hours after the probe was announced.

Bumi has lost 85 per cent of its value since the IPO of Vallar, subsequently renamed Bumi, in 2010.

Its shares closed down 7.14 per cent yesterday at 156p.