Tuesday, March 26, 2013

Indomobil Sukses Internasional Protected Downside

Indomobil Sukses Internasional: Protected downside (IMAS, Rp5,550, Buy, TP: Rp6,550)

We recently paid a visit to IMAS, discussing the latest update on key issues like tender offer progress and earnings outlook. We retain our Buy call as we view the tender offer price as a floor than a ceiling. While downside is protected, the upside could be rewarding, such as from the potential launching of All New Nissan Livina. Our key takeaways from the visit are summarized below. More details and other key issues are available in a Company Focus report released yesterday.

Tender offer progressOn March 4, Gallant Venture (GALV) has received SGX approval on IMAS acquisition. Referring to the latest indicative timetable, GALV expects to conclude the takeover on May 2. The tender offer, pending OJK approval, will proceed right after, no later than June 13 as the deadline. GALV has no intention to privatize IMAS, thus the tendered shares would be refloat back. Timeframe is not specified, but it is required to be within less than two years.

Earnings outlook
4Q12 results are likely below our and consensus, due to weak volumes and higher discounts. Discounts are still persistent; thus we expect some downside in our FY13F margins. We may also lower the mining contracting revenues, but thankfully this division contributes only about 5% to IMAS gross profit. Our FY13F NPAT is now 7% above consensus.

Upside from All New Livina
Assuming no new models, IMAS may revise down FY13 Nissan sales volume target from 90k to 80k units, making it in-line with ours. The revised guidance may turn out to be conservative if a new Livina is launched, which is very possible as the model is reaching the “usual” lifecycle (6-7 years). If a new Livina is launched, we think this could bring a surprise in 2013-14 Nissan volumes. Livina now is the biggest contributor to Nissan volumes with >3k units.

Maintain Buy
Share price downside is protected by the tender offer, but upside could be rewarding, in our view. While some see it as an overhang, we rather view the proposed Rp5,425/share tender offer price as a price floor than a ceiling. We also do not see strong intention for GALV to privatize IMAS. The stock now trades on 12.7x FY13F PE or 13.7x on consensus.

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