Company update:
Bumi Serpong Damai (BSDE IJ, BUY, TP: IDR2,650)
Proposes New USD Bond Issuance
Bumi Serpong Damai (BSDE IJ, BUY, TP: IDR2,650)
Proposes New USD Bond Issuance
Yesterday, Bisnis Indonesia reported that BSD
is planning to issue new bonds in order to fund its refinancing and capex. The
new bonds will have a longer tenor of seven years, and are expected to have a
lower coupon rate. With an assumed new coupon rate of 5%, its cost savings pa
could be around USD3.7m (IDR47.6bn). The stock is currently trading at a 61%
discount to our estimated RNAV, implying 14.6x-12.8x P/Es for FY17F-18F.
Maintain BUY, with an unchanged TP of IDR2,650 (19% upside).
♦ Refinancing its
USD-denominated bond.
Bumi Serpong Damai (BSD) is planning to call its USD-denominated bonds (worth
USD225m, with a coupon rate of 6.75%) which are scheduled to mature in 2020,
and has proposed to refinance it by issuing new USD-denominated bonds. The new
bonds will set 2023 as the maturity date, which implies a longer tenor of seven
years. It plans to use USD75m of the total proceeds to finance capex and
working capital. While there are no further details on the size of the
bonds to be issued and the new coupon rate, we can expect the amount to
increase and the coupon rate to be lower.
♦ Our take. We are positive on
the company’s plan to refinance its existing USD-denominated bonds, in light of
the current trend of declining rates. It will also cut down the company’s
interest costs. While Bank Indonesia cut the benchmark policy rate to 5% on 22
Sep, RHB economists expect the rate to be cut by another 50bps moving into
2017. Additionally, the strengthening of IDR against USD should also reduce the
exchange rate risk.
♦ Calculating the cost
savings. As
the USD225m bonds are currently trading at a premium of 107.4%, this implies
that its par value is USD209.5m with an interest expense of USD14.14m pa.
If everything goes as
planned and there are no changes made to the bonds’ size, lowering the coupon
rate by 25bps should save the company USD520,000 pa in interest costs (Figure
1).
♦ Maintain BUY, with an
unchanged TP of IDR2,650. We maintain our FY17F SOP-based TP of IDR2,650. The stock
is still trading at a hefty 61% discount to our RNAV estimate of IDR5,310 per
share. BSD remains as one of our Top Picks for the property sector, given its
healthy balance sheet and sufficient large landbank that allows it to build properties
that can cater to a broad range of buyers and budgets. Potential catalysts
include possible commercial land lots that are still under negotiation being
sold. Key risks to our call are lower-than-expected presales and a delay in the
progress of construction projects.
Kindly click the following link for the full report: Bumi Serpong Damai : Proposes New USD Bond Issuance
Best regards,
Lydia Suwandi
Vice President
Research Analyst - Property
PT. RHB Securities
Indonesia
