Thx Kath for sharing.
Coal is still sexy.
ally
--- On Thu, 7/17/08, KC <[EMAIL PROTECTED]> wrote:
From: KC <[EMAIL PROTECTED]>
Subject: [obrolan-bandar] United Tractors (UNTR IJ, Rp10,400 BUY) The Rights
Issue is All Right
To: obrolan-bandar@yahoogroups.com
Date: Thursday, July 17, 2008, 10:17 PM
United Tractor
The Rights Issue is All Right
A rights issue is under way
UNTR is planning a rights issue, which is subject to be approved by the
extraordinary shareholder meeting on Aug 19, 2008. Details of the rights issue
– including size and timeline has not been disclosed, other than it is planned
to be done in Sep08. The proceeds will be used for acquisition of another coal
asset by the end of this year, Pama’s capex, and working capital need. If
minority shareholders do not subscribe, they could be looking at an 8.7-12.2%
dilution, depending on the rights issue price.
Is rights issue the right solution?
Based on our calculation, the total funding needs could reach USD540mn. Since
the company policy is to have a 60% net debt to equity ratio, in our estimate
the remaining debt capacity is only USD160mn. Therefore, we believe the
company will use rights issue to obtain the remaining fund needs, which is
about USD380mn.
Will Astra subscribe?
We believe ASII will subscribe considering:
1) UNTR is ASII’s 2nd largest operating income contributor.
2) UNTR’s business is still prospective due to the strong commodity sector,
mainly coal and CPO.
The coal mining companies are planning to expand their capacity from 230mn
ton this year
to 288mn ton in 2010, while 1 mn Ha of land is still available for palm
oil plantation in Papua.
3) Astra’s net cash position of Rp1.2tn by 1Q08.
Maintain BUY, TP Rp18,000
We maintain our BUY recommendation because of its on track performance (2,492
heavy equipments per Jun08, 55% of our forecast) and the still bright prospects
of the commodity sector. The current valuation is attractive, trading at PE
08F-09F of 13.3-8.7x, if compares to the coal sector, which according to the
consesus is trading at an average of PE 08F-09F of 17.3-9.7x. If we assume
there is no impact of the rights issue to UNTR’s capacity, EPS 08-09F would
decrease. However, given the management and the main shareholders quality, we
believe UNTR’s profitability could be maintained. Furthermore, the current
share price implies a 10.5% risk premium, which we think is unwarranted given
UNTR’s strong business model. Our TP is Rp18,000, implying a PE08-09F of
23.2-16.0x. BUY.
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