Mandiri Sekuritas PT Inco, seeks US$250mn revolving credit facility

PT Inco: seeks US$250mn revolving credit facility from affiliated
company (INCO, Rp2,100, Sell, TP:Rp1,350)

PT Inco disclosed that it plans to have a US$250mn short-term revolving
credit facility from an affiliate Vale International, a company wholly owned
by Vale Canada (which owns 100% of Vale Inco Ltd, the 60.8% owner of
PT Inco). PT Inco will seek approval of this transaction in an EGM on
April 17, 2009. The revolving facility will be used to fund Inco’s working
capital requirements and various general activities.

With the revolving credit facility, Inco loses its net cash position and
would have a net gearing ratio of 5.5%, still a comfortable level in our
view. We surmise that by tapping this facility, it would preserve its cash
on hand (about US$166mn beg of 09) and nickel in matte sales collection
to fund its capital expenditures of US$229mn this year, mainly attributed
for its hydro generating Karebbe project. With no imminent growth
prospects on nickel price and demand, we maintain sell on the stock,
which currently trades at PER09F of 20.8x.