● Banpu sold 98.5 mn shares or 8.72% of ITMG, effectively reducing its stake from 73.72% to 65%. The indicative price range is Rp36,150-38,500/share. We expect Banpu to raise about US$400 mn from the transaction.
● The ITMG stake selldown is not totally unexpected, but has been listed as one of Banpu’s options to raise fund to buy CEY. Strategically, this reflects reallocation of capital within the Banpu group from a more expensive market in Indonesia to an asset with more visible long-term growth and less-demanding valuation as CEY.
● The minority shareholders of ITMG would benefit from higher free float and liquidity. We expect ITMG’s profile with foreign investors to improve, as trading liquidity should rise from the current level of about US$4.4 mn.
● We expect the transaction to have negative impact to ITMG’s share price in the short term. In the medium term, we see ITMG as the most leverage play on rising spot coal prices, with the highest dividend yield. Our target price of Rp49,000 is based on a P/E of 12x.
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