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May 16, 2016 10:48:05
Astra Agro Lestari: Strong fundamental is intact
- There might be short-term share price correction. Astra Agro Lestari (AALI, BUY, TP:IDR19,500) would be deleted from MSCI Indonesia Index since 1 June 2016. As of 29 April 2016, Astra Agro Lestari’s foreign ownership is 174.5mn shares (equivalent to 11.1% of total outstanding shares). Therefore, we think there might be short-term share price correction due to selling pressure from foreign fund managers, who benchmark their fund performance to MSCI Indonesia Index.
- Exercise price of Astra Agro Lestari would be announced at end of May. We estimate the discount of its exercise price to current share price is around 15% (exercise price > IDR12,000).
- Strong fundamental is intact. Astra Agro is a laggard play. Astra Agro Lestari’s share price performance YTD is -6.3% (vs JCI: +3.7% vs Jakagri: +1.4%), which we attribute its bad share price performance to: 1) overhang until rights issue is done. 2) deletion from MSCI Indonesia Index. We think Astra Agro’s strong fundamental is still intact such as good corporate governance. Therefore, we think it’s good opportunity to accumulate the counter after deep correction.