Indika Energy: Seeking approval of 10% non preemptive right issue (INDY, Rp4025, Buy, TP: Rp5,200) - Mandiri

 INDY yesterday submitted notice to Bapepam to have Annnual General Shareholders Meeting and Extraordinary General Shareholders Meeting on 8 June 2011. The highlight agenda were seeking approval of 10% non preemptive right issue
 Based on the company, they are just seeking funding flexibility by having the approval in advance to support any corporate action that will be taken this year.
 As addition, INDY will have additional net debt of around US$315mn this year, combining US$180mn loan for MBSS’s 51% stakes acquisition and net proceed of US$135mn from the bond refinancing (after considering US$165mn exchange offer of the 8.5% Senior Notes that due in 2012). INDY will likely to have around 1.5% lower effective interest rate on its new bond
 Taking into account all those net additional debt, we expect INDY’s debt to equity ratio will increase to around 1.1x from 0.8x in 2010 and net debt to equity ratio will increase to 0.35x from 0.11x in 2010.
 INDY is having many corporate actions this year, including MBSS acquisition, refloating of minimal 20% PTRO’s shares, bond refinancing and 10% non preemptive right issue. The most likely next corporate action should be coal asset acquisition plan in our opinion.
 Currently we have Buy rating on the stock. INDY is traded at 12.2xPER11F