Monday, August 22, 2011

PT Kawasan Industri Jababeka Tbk : The company is issuing 6,036 million new shares

by Mandiri Securities

Short prospectus out on the local press. The company is issuing 6,036 million new shares (around 30% of enlarged capital) at Rp250/share (a premium to last close of Rp191), to raise around Rp1.5trn. Last week, the company announced the plan to acquire a 100% stake in PT Banten West Java tourism (BWJ) and a 21.6% stake in PT Tanjung Lesung Leisure industry (TLI), for Rp1.5trn. BWJ already owns a 78.4% stake in TLI, so post the acquisition KIJA will direct and indirectly own 100% of both BWJ and TLI. EGM will be held on 21 September, ex-date on 28 September.

Our comment – The event should be a positive share price catalyst for KIJA, we re-iterate Buy and TP of Rp220. We co-incidentally met with KIJA management yesterday with the following take-aways:

The key asset for BWJ and TLI is the 1,300 plus hectares of land in Tanjung Lesung, a beach front peninsula overlooking the Anak Krakatoa mountain in Banten West Java, around 170km from Jakarta. With little debt on BWJ’s and TLI’s balance sheets, the acquisition implies land purchase price of slightly over Rp100,000/sqm. Based on third party NAV appraisal, the deal was valued at around 60% discount to NAV. Although not directly comparable, we note that the price of beach front properties in Bali has appreciated to over Rp7mn/sqm on prime locations.

One of the key senior management at KIJA is the chairman of Asia Pacific travel association who is conscious of Indonesia’s recent push toward tourism industry (under the economic acceleration program of PPPI). Indonesia is planning to: (a) re-tender the Serang-Labuan tollroad project that will cut the travel time to Tanjung Lesung (from Jakarta) significantly, (b) build a small international airport 15km away from Tanjung Lesung, and (c) create special tourism zones with tax breaks and multiple entry visas for international tourists.

Tanjung Lesung offers unique tourist attractions, such as calm water peninsula, scenic route to Ujung Kulon where the near extinct one-horned rhinos are located, virgin forests, and the Badui Village. Current travel time from Jakarta is about 3.5 hours through an in-land road, or 5.0 hours through the coastline Cilegon-Anyer-Carita route, which is congested by industrial traffic. A toll-road connecting Serang and Labuan would cut the travel time significantly.

There is a next corporate action for KIJA, where the company would issue US$150mn promissory note that is exchangeable into shares in PT Jababeka Infrastruktur (JI). JI plans to do an IPO within 5-years, when the exchange into shares will happen.

This particular corporate action would consolidate voting power in KIJA, which was previously fragmented. The controlling consortium would increase its ownership from 40% before the deal, to almost 60%.

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