Jababeka executing two corporate actions (TP Rp265) - UBS

12-month rating Buy Unchanged
12m price target Rp265/US$0.03 Unchanged
Price Rp156/US$0.02

?? Rights issue to acquire 1,340ha of land and Tanjung Lesung resort Jababeka signed Rp 1.5tn CSPA with two tourism developers (Banten West Java Tourism and Tanjung Lesung Leisure Industry) for 100% ownership over Tanjung Lesung resort and 1,340ha of land located in West Java. Company plans to finance 100% of the purchase using rights issue proceeds.

?? Combined with issuing US$110mn to US$150mn exchangeable notes
Jababeka is also issuing $110mn exchangeable notes, convertible to the equity of Jababeka Infrastruktur, its subsidiary that owns Cikarang Dry Port and 130MW gas power plant. Proceeds will be used to finance expansion of dry port, debt repayment, construction of power plant’s transformers and land acquisition.

?? Positive on exchangeable notes; short term negative on rights issue We are positive on the issuance of exchangeable notes; it prevents dilution on KIJA and allows CIMB debt repayment. We are negative on Tanjung Lesung acquisition as upside from this project is 7-10 years away in our view; Jababeka needs to spend more working capital for infrastructure development. However, we are positive in the long run as the acquisition could allow Jababeka to create another industrial estate like Cikarang.

?? Valuation: Reiterate Buy at Rp 265/share
We base our price target on a sum of the parts. We use DCF to value the power plant and dry port projects, the discounted development method for development property, and single cap rate methodology for investment property. We apply a WACC of 12.1%.