Mansek Kawasan Jababeka:More visibility on Dry Port prospects (KIJA,Rp116, Buy,TP:Rp265)

Hatta Rajasa,the coordinating minister for the economy,said on Saturday that the first phase of construction railway connecting Cikarang Dry Port, owned by KIJA which brokeground last Saturday,August 28,2010, with Tanjung Priok Port could be completed within three months.The completed railway is expected to increase industry productivity and capacity having faster delivery.Additionally,the public works ministry set to complete construction of the flyover connecting the main high-way straight to the main dry-port hub by end of this year.

Cikarang Dry Port serves as an extension of Tanjung Priok,located on 10ha area of land with 150k TEUs capacity,extendable up to 150ha.Upon reaching TEUs of 276k throughput units by 2012,net income contribution from the dryport is expected to be about US$5mn/year.Note that our TP of Rp265 excludes any contribution from the dry port which we see as an additional catalyst in the 2-3 years.We maintain buy,trading at 74% discount to NAV10.

Mansek ELTY started disbursing Right Issue fund (ELTY,Rp116,Buy,TP:Rp136)

Following the completed Right Issue transaction process,it is reported by Kontan today that ELTY has started running its corporate action using proceed generated from the transaction.Although the company declined giving detail comment, Nuzirman Nurdin,company ’s corporate secretary,confirms that ELTY has started disbursing the proceeds,which one of them purposed for financing its 51%acquisition of Bukit Jonggol area of land.As reported earlier,ELTY raises Rp1tn fund through Right Issue to take equity part in Bukit Jonggol,which the remaining balance of Rp900bn covered through 1 year loans from investment company,Sociate Strasbrough (SS),with interest 24%.

The switching inclusion structure of SS in the transaction to interest loan from initially profit sharing scheme leaves further burden on ELTY ’s P&L,besides capitalized interest of loans purposed for Kanci Pejagan toll project which come into realization this year.

We are reviewing our forecast on ELTY,the stock currently trades at 71%discount to NAV10 and PE10 69.8x.This added interest expense would worsen earnings pressure as well as pose a tighter cash flow ELTY considering it could face a Rp400bn interest expense payment (inclusive of the SS loan)while cash is only about less than Rp600bn currently.