Indonesian Companies in Focus: Astra Agro Lestari's Rights Issue
The plan of Indonesian palm oil producer Astra Agro Lestari to raise IDR 4 trillion (approx. USD $305 million) through a (preemptive) rights issue by issuing 450 million new shares has caused great volatility in the performance of the company's shares listed on the Indonesia Stock Exchange (IDX). On 11 April the rights issue plan will be discussed at an extraordinary general meeting and if approved the rights issue will be conducted within 12 months. The company decided to seek this corporate action in order to pay off debt.
Parent company Astra International, which currently owns a 79.68 percent stake in Astra Agro Lestari, is ready to act as standby buyer of the new shares (if shares are not taken up by minority investors). If these minority shareholders do not purchase the new shares it would imply that the portion of Astra Agro Lestari's shares that is in the hands of minority shareholders declines from 20.32 percent to 15.80 percent. The shares offered through the rights issue are expected to be priced at IDR 8,890 per piece, nearly 50 percent cheaper than shares traded at the IDX.
Aditya Srinath, analyst at JP Morgan Securities Indonesia, said the rights issue will cause a falling share price of Astra Agro Lestari on the short term. However, the positive side is that the company's net gearing ratio improves to 32 percent (meaning the company's debts are equal to 32 percent of its equity). Due to share dilution, the company's price-to-earnings ratio (P/E ratio) would jump from 11.8 times to 13.3 times this year.
In the last week of February shares of Astra Agro Lestari fell sharply after the rights issue plan became known to the public. On Thursday (10/03), shares rebounded more than 10 percent.
Stock Quote Astra Agro Lestari - AALI:
Over the past couple of years Indonesian palm oil producers have been plagued by weakening palm oil prices amid sluggish global demand. Astra Agro Lestari reported a 75 percent (y/y) drop in net profit to IDR 698 billion (approx. USD $53 million). However, this year palm oil futures may care forecast to climb around 15 percent (y/y). This would be a great relieve for Astra Agro Lestari.
Besides the low palm oil price (and falling revenues), Astra Agro Lestari was also badly affected by the weak rupiah exchange rate last year. The firm's bottom-line was eroded by this rise in foreign exchange loss to IDR 580.36 billion from IDR 126.6 billion in the previous year. This year so far the rupiah has been the best-performing emerging market currency.
Future Projection Financial Performance Astra Agro Lestari:
| 2014 | 2015F | 2016F | 2017F | 2018F | |
| Net Revenue | 16,305.8 | 13,059.0 | 14,911.0 | 15,977.0 | 17,439.0 |
| EBITDA | 4,259.0 | 4,492.0 | 4,493.0 | 4,494.0 | 4,495.0 |
| Net Profit | 2,504.0 | 698.0 | 1,526.0 | 1,665.0 | 1,901.0 |
| P/E Ratio (x) | 17.8 | 26.8 | 20.7 | 19.1 | 16.8 |
| PBV (x) | 4.1 | 2.7 | 1.8 | 1.7 | 1.6 |
in billion of IDR rupiah, unless stated otherwise
Source: Phillip Securities
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