Reported in newspaper that Bumi Serpong (BSDE IJ) is to acquire 85% of sister company Duta Pertiwi (DUTI IJ) (Sinar Mas currently owns 85% of DUTI, and 51% of BSDE)
We talked to the company: BSDE said they have not made an official announcement yet but had disclosed the plan to Bapepam. An official announcement will be made in a few weeks time. Hence, at current stage, there are no further details yet on the deal i.e related to pricing, etc.
We wrote back in 23 Aug 2010 about this potential deal (report: "Bringing in a sibling?" – see attached) and highlighted that:
From operational standpoint, we think the consolidation is beneficial given the combined entity will have a sizeable 4,250ha land bank in Greater Jakarta and Surabaya. Moreover, DUTI’s reputation as a good commercial developer with strong recurring income will compliment BSDE’s non-recurring income at the moment. Both companies also have strong financials, and have enjoyed good margin expansions. Total land bank combined will be 4,250ha.
Our estimated NAV for BSDE is Rp17tn, while DUTI’s NAV as estimated by the company is Rp7tn. Translated to NAV/sh, DUTI is now trading at 58% discount to NAV, while BSDE at 47%. At this juncture, as a separate entity, BSDE has larger land bank, bigger market cap, float and higher liquidity.
BSDE's market cap, cash position, and land bank implies that shareholders can indirectly buy land for the equivalent of US$32psm today, about one-tenth the selling price of land. On current earnings, the company trades at 22x PE2011, but assuming the higher GP margin, this drops down to 17x PE11 and 13x PE12, with 18% ROE. BSDE is now trading at 39% discount to our NAV assumption of Rp1,572/sh.
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