Semen Gresik lLikely to issue US$300 million bonds

Semen Gresik lLikely to issue US$300 million bonds
Published: 02 May 2007

PT Semen Gresik is likely to issue US$200 million - US$300 million bonds to finance the company’s capital expenditure on the development of new cement facility.

The company will issue the bonds after organizing AGM next month on internal restructuring.

"The bonds issuance will be in third quarter, and JP Morgan Securities will become the underwriter," some brokers of a bank knowing the plan told Bisnis Indonesia yesterday.

But the Vice President of Semen Gresik Rudiantara said the company has not taken decision on the bonds issuance. "We are still calculating our need on capital expenditure as we are still working on the review on this."

The plan on land acquisition has been consolidated between Semen Gresik and the unit, and A.T. Kearney and JPMorgan are still working on the plan.

The Vice President Commissioner of Semen Gresik, Darjoto Setyawan, also said he does not know the bonds issuance plan.

He said starting today the company will start its non deal road show to Singapore, Hong Kong, New York and London.

"The road show, supported by JPMorgan, is the first since Rajawali Group becomes the company’s shareholder."

If Semen Gresik realizes the plan, it will be the third dollar bonds this year after US$400 million bonds of PT Berlian Laju Tanker Tbk and US$250 million bonds of PT Indika Inti Energi. The two bonds have been oversubscribed at US$4.8bn and US$4bn.

On market research on Semen Gresik issued by PT Trimegah Securities Tbk on April 26 2007, Stanley Tjiandra, an analyst, said that the capital expenditure of Semen Gresik until 2009, on top of the routine one of IDR150bn, will be two.

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The capital expenditure is to acquire lands in Tuban and in Padang as much as IDR100bn. The controller of 44.7 per centcement market of Indonesia plans to buy the land to secure the raw material.

The company also needs IDR2.5trn to develop new facility. In this regard, the company need IDR500m this year and 2008, and IDR1.5trn in the two following years.

The securities company believes the company will finance the plan using its internal cash. As of December last year, the cash of Semen Gresik was IDR1.9trn.

The research has revised the previous projection as it has not been clear when the company will start developing the new facility. The securities company believes the postponement was due to the presence of Rajawali Group as the new shareholder.

Trimegah believes Semen Gresik will start operating the new facility in 2010 so that the production capacity of the company will increase by 2.5  to 19.4Mt.

With such capacity, the sales of Semen Gresik will reach IDR14.4 trillion, and the net profit will be IDR2.5trn, representing 32.2 per cent and 39.5 per cnet higher than the previous projection.

In this regard, Trimegah revised the stock price target from IDR40,820 to IDR51,468.

The security company also recommends investors to buy the stock and has changed the preferred cement stock from Indocement Tunggal Prakarsa to Semen Gresik as the company’s potential growth is 35.1 per cent compared with 14.2 per cent on Indocement and 14.5 per cent on Holcim Indonesia.