Company update:
Astra Agro Lestari (AALI IJ, BUY, TP: IDR17,800),
Overhang From Rights Issue Should Disappear
Astra Agro just announced the exercise price and the number of new shares for its rights issue, which we think should eliminate the overhang in its share price. It would do rights issue with the ratio of nine old: two new shares with an exercise price of IDR11,425, which would dilute its FY16F and FY17F EPS by 9% and 16% respectively. Cum-rights date is 6 Jun 2016. We reiterate our BUY call with a lower IDR17,800 TP on Astra Agro, which we view as a laggard play. Our revised TP is based on an unchanged 16.4x P/E target on diluted FY16F EPS.
¨ Share price overhang
should disappear.
Astra Agro Lestari’s (Astra Agro) share price has slid 9.2% YTD (vs Jakarta
Agriculture Index (JAKAGRI):+5.4%; Jakarta Composite Index (JCI): +1.1%), which
we attribute to:
i. An overhang until the
exercise price and the number of new shares for its rights issue are announced;
ii. Selling pressure from
foreign fund managers due to the deletion of Astra Agro from MSCI Indonesia
Index, which takes effect today.
We think the overhang in its share price
should disappear given that Astra Agro has just announced the exercise price
and the number of new shares for its rights issue.
¨ Rights issue ratio of
nine old: two new shares with exercise price of IDR11,425. Astra Agro aims to
get rights issue proceeds of IDR3.99trn, which would all be used to settle some
portion of its debt. The rights issue ratio is nine old shares to two new
shares, with an exercise price of IDR11,425. If existing shareholders do not
exercise their rights, they would experience dilution by 18.18% at the maximum.
Astra International (ASII IJ, BUY, TP: IDR7,400) is the stand-by buyer for the
rights issue.
¨ FY16F and FY17F EPS
to be diluted by 9% and 16% respectively. The higher number of shares
outstanding post-rights issue, partly offset by less interest expense, would
dilute its EPS to IDR1,086 in FY16F and IDR1,063 in FY17F. Based on the
company’s current market capitalisation and the rights issue proceeds of
IDR3.99trn, Astra Agro’s theoretical ex-rights price (TERP) is IDR13,656.
¨ A laggard play. We reduce our TP to
IDR17,800 (from IDR19,500) to factor in the dilution effect of rights issue and
less interest expense. Our revised TP is based on an unchanged P/E target of
16.4x (its 10-year mean P/E) on our diluted FY16F EPS. At current price levels,
Astra Agro’s EV/ha is USD9,088 (vs its 10-year average EV/ha of USD14,756). Key
risk to our BUY call is weakening CPO prices from the current strengthening
price trend.
Kindly click the following link for the full report: Astra Agro Lestari : Overhang From Rights Issue Should Disappear
Best regards,
Hariyanto Wijaya,
CFA, CFP, CA, CPA
Vice President
Research Analyst – Heavy
Equipment, Plantation
PT. RHB Securities
Indonesia
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