Company Update / Metals / IJ / Click here for full PDF version
Author(s): Ryan Winipta ;Reggie Parengkuan
- signed strategic collaboration MoU with Eternal Tsingshan (ET) on its nickel projects (i.e. IMI, WMI, BSE, and POS).
- subsidiaries, HNP and THN, would issue a mandatory convertible notes to ET in 3Q24F, allowing ET to convert the notes into equity stake.
- Conversion timeline is undisclosed, but we expect end FY24F. Downgrade to Hold on lower EPS due to higher minority interest.
General overview of Tsingshan- deal
Through the strategic collaboration, Eternal Tsingshan (ET) would receive mandatory convertible notes from 's nickel subsidiary, Tanito Harum Nickel (THN) and/or Harum Nickel Perkasa (HNP), which own all of nickel projects (i.e. IMI, WMI, BSE, and POS, Fig. 3); the convertible notes - set to be issued by 3Q24F, would represent up to c.49% stake in 's nickel portfolio, at the time of conversion. Such transaction shall reverse previous acquisitions in these nickel assets from Sep-23 to Mar-24, with will own 41%/51%/26% stake in WMI, IMI, and BSE vs. 81%/100%/51% previously, assuming c.49% stake conversion (Fig. 4).
Key positives from the strategic collaboration
The transaction would allow to: 1) fully-consolidate the financials and operational of the nickel-assets, 2) settling the liabilities (i.e. notes payable) from IMI and WMI initial stake increase to c.99% and c.81% and 3) reducing the capital required to finance upcoming projects (i.e. BSE HPAL ). Thenominal amount of the convertible notes proceeds remain undisclosed, but we think it should not be below ~US$500mn, similar to the purchase amount of these nickel-assets stake from Tsingshan (Fig. 5).
However, we think the negatives outweigh the positives
Despite the key positives, we think market's knee-jerk reaction (share price declined by c.12% post-announcement) prove that market has yet to priced-in such transaction to occur. Similarly, we have previously factored in higher ownership stake for IMI, WMI, and POS in our SOTP . We laid out our base-scenario that the notes conversion will occur in end FY24F to fulfil gross debt to EBITDA covenant of 3.5x in FY25F, and assuming c.49% debt-to-equity conversion from Tsingshan. We also factored in to have a higher minority interest as a result of reduced ownership starting FY25F.
Downgrade our rating to Hold with a TP of Rp1,450/share
We reduced our FY24F/25F NP forecast by -1%/-17%. As a result, we downgrade our rating to Hold and lower our TP to Rp1,450/share(from Rp1,800/share) as we adjusted our SOTP valuation (Fig. 7). Upside risks is lower than expected equity stake conversion (than 49%) from Tsingshan.
Sumber : IPS
powered by: IPOTNEWS.COM
