Quick takes - Kalbe's tender offer - by Erwan Teguh
(EPMT IJ / EPMT.JK, OUTPERFORM - Maintained, Rp770 - Tgt. Rp1,050, Healthcare)
Kalbe has just announced an offer to buy 31.81% of Enseval at Rp870/share. The offer is effective today for 30 days. We believe the offer price could be improved given Enseval's improving growth outlook and stellar balance sheet. Enseval's sales have been growing faster than Kalbe's in the past five quarters as it builds up third-party businesses. Consequently, earnings growth outstripped Kalbe's by nearly 2x in the latest quarter, at 27.2% yoy vs. 15.4%. Signs of improvement are aplenty after the 2005 merger, including improved working capital days and better margins. We upgrade our earnings forecasts by 2-8% and raise our target price to Rp1,050 (DCF-based, WACC 16.2%, LTG 5.9%) from Rp715, implying 8.1x and 6.6x CY09-10 earnings. Maintain Outperform.
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