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I’m already skeptical about any company that has Bakrie family as one of the major stock holder. No, I have nothing personal against Bakrie (or his family for that matter), it’s just that I never did well in the stock market while holding their company. Be it BUMI, ENRG, or BNBR (UNSP is sole exception).

They always make a spectacular manuver that shakes Indonesian stock market that was created by the boom or the bust by their company’s action. It’s nothing new when I heard several months back that they are going to issue deviden more than 20% of their market value (Rp200, their value at that time ranging from Rp800-Rp900). The money is of course taken from their sell-off of their main money machine, KPC and Arutmin.

Some said that the coal mine that was held by those two companies are almost dry, hence the reason why the Bakrie group wanted to sell it. Some said that the money from that proceeds from the sale would be used to acquire ENRG (yet another Bakrie’s company).

We of course heard the rumours flying around the market that the sale might failed. Not because external factors (such as market factors or macro-economics outlook), but because Rennaissance group, the one that should’ve been buying KPC and Arutmin, had having a hard time to find a financing company that agrees to lend them money to proceed with the buy-out.

Adding to that is their reluctance to immediately issue the deviden that they are promising. Some said that it will be the end of the year, some said it will be July, some said that it will be done before the acquisition take place. One thing for sure, now we won’t see any devidend at all (unless they are willing to issue bond to finance the devidend execution).

So it comes to no surprise that the transaction failed. That Bumi maybe in need of some cash injection to acquire Energi Mega Persada. Even then, they won’t be able to finance the expansion of ENRG (simply because they are cash-strapped) and thus makes the acquisition FUBAR (fuc*ed up beyond any reason).

Of course, the officials from both company said that it was alright. That the merger (or is it acquisition??) will still be interesting for the market and that they will add more values to the portfolio.

My friend who bought a big share of Bumi (obviously for its earth-shaking devidend rate) also has the same view as the company’s official. He said that this cancellation will increase the market price of the company simply because Bumi has the chance to hold-on tight to its cash machine (yeah, KPC and Arutmin is considered to be the cash-machine of Bumi), hence Bumi will have a better cash-flow. Better cash-flow = market favorite. At least that’s what he said.

But I have a different view on this. I think that Bumi’s share won’t increase, even when they do, it won’t take off more than 850 at least on this 6 months period. Why? Simply because there’s no more demand for the company.

Indonesian stock-market trader got frantic when they heard the rumour that Bumi will issues Rp200 devidend per share back in January. They are racing to buy the company’s share simply because it’s a bargain at that time (it’s well below Rp800). What drives the price skyward (up to Rp1000+) is the market’s greed that the rumors are true and Bumi WILL keep its promise to share the devidend.

And since there will be no devidend to share because of the sell-off cancelation, there’s no greed to push the demand for the company’s stock. It’s a simple demand and supply theory. When the demand is slowing down while the supply still last, the price tends to go down (or at least won’t go up).

Some people still argues (including the company’s official) that the merger still holds its own attraction to the greediness of the market trader. But again, I hold a different view. As I said earlier, Energi Mega Persada needs a fresh batch of money to finance its expansion. Without expansion, the company will only serves as a sitting duck. If the merger does indeed goes through, Bumi or Energi won’t have the money they need to finance that expansion and thus they need to bring outside financing to do it.

Bond, obligation, bank lending, comes to mind. And I tell you, the company’s fundamental valuation won’t be as good as if they bring the capital from internal sources. That’s why I think the merger won’t do the company(ies) any good in this case.

If you still hold Bumi’s share, my best suggestion is to sell it while you still have the chance.