Mandiri Sekuritas Semen Gresik: To acquire cement producer in Southeast Asia (SMGR, Rp8,250, Buy, TP: Rp9,400)

SMGR plans to acquire cement producer, which located in Southeast Asia region in order to increase its capacity. Rumor said that they are eyeing Cement Industries of Malaysia Berhad (CIMA). They budgeted around US$300mn to acquire cement producer which has 2-3mn tons of capacity. Note that CIMA has total cement production capacity of 3.4mn tons, thus the US$300mn acquisition is equal to EV/ton of US$88, assuming they have no debt. Should realized, this will bring positive outcome to SMGR as they will have an additional capacity without having to wait its new plant in which currently under construction. SMGR is currently trading at PER10F of 13.1x and the lowest EV/ton of US$249.