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Feb 06,2017 14:16:11

Logindo Samudramakmur: Key Takeaway From Analyst meeting

Last Friday, Logindo Samudramakmur ($LEAD) has organized an analysts meeting to explain on its impending rights issue plan and updates on its business outlook. We've came out with mixed bag view on the stock, although solvency risks of LEAD are now significantly lower than last year, earnings recovery is still farfetched due to insufficient numbers of jobs in the market, producers are not bullish on oil price yet, granted the higher YoY crude oil price, some key points as below:

  1. LEAD is aiming to raise USD10m/IDR135bn from this corporate exercise, which translate into a maximum of 63.5% of its current paid up and issued share capital. The rights are priced at IDR83-92/share, or 20% discount to Theoretical ex rights price in a fully subscribed scenario, according to share underwriter.
  2. LEAD's 35% shareholder, Pacific Radiance Ltd has committed to fully subscribe. Owner Pak Eddy Logam and his family owns 40% of LEAD, he has indicated his will to subscribe and is looking for funds to do so. The remaining 25% are owned by general public. All in, management expect to raise at least USD5-6m from this exercise.
  3. Throughout the meeting, owner has repeatedly emphasize on his willingness to sustain the business and the pain of doing a major rights issue at current valuation (0.17x P/B) . Having said, he believe business has seen its bottom point while improvement is noticeable due to the restructuring of LEAD's debt and the impending job flows from Tangguh Train 3 by BP, an USD8bn LNG project.
  4. Coming to the business, LEAD has extended and reduced the principal repayment of its debt from a monthly commitment of USD2.3m to USD890K. Management indicated net cash outflows as of November 2016 was USD200K/month, significantly lower than earlier 2016 due to combination of debt restructuring and cost cutting.
  5. LEAD is bidding for 15 long term charter contracts from Tangguh Train 3, mostly high tier OSV jobs, apart from that, the project's main contractor, Chiyoda will be offering numerals short term jobs from 3Q17 onwards. Competition for these jobs are likely to be steep, higher utilisation is possible but freight rate will remain depressed.

All and all, we see LEAD as an appealing 24-36 months investment case due to its depressed valuation of 0.17x P/B, significantly lowered solvency risks and higher utilisation rate from 2H17 and suggest shareholders to subscribe to the rights. On 12 months basis, profits (share price driver) will likely remains depressed due to an oversupplied OSV market, this is in combination of a new oil production sharing regime that might exert further pressure to the servicing players. (Norman Choong, CFA)

Apr 22,2015 22:59:04
PGAS: Industry groups continue discussion on lowering gas prices. Glass and ceramics manufacturers, who see gas a 35% of their cost base, continue to ask for lower gas prices amidst slowing demand for their products. They are expecting lower prices from 2016. Industry also wants take or pay clauses removed from their contracts. The Ministry of industry has supplied scenarios of lower gas prices by 8-32.6% which it argues would actually increase taxation by Rp12.9-51.9t and economic output by Rp72.4t to 289.7t. Comment: At an event CLSA held this week with the President’s office, we noted a reticence to directly intervene in prices, instead support for infrastructure owners earning reasonable rates of return. It’s not clear how to us lower gas prices would automatically lead to higher Gov’t revenues or output – the upstream industry is the major contributor to the state budget (the state earns 70% from gas production) and c. 18% from every dollar PGAS earns in dividends and taxes. Ironically diesel prices remain 45-50% higher than gas and distributers of that form of energy (far more prevalent than gas) are earning higher margins than PGAS right now, yet this is not being discussed in the media by industry groups.
Quotes delayed, except where indicated otherwise.
95.00 4.00 (4.04%)
Logindo Samudramakmur Tbk.
Last Update 02:54:11