Mar 7, 2010

It's time to play for Elnusa?

Trading volume and value of PT Elnusa Tbk (ELSA) on the last Friday soared significantly. ELSA's trading volume reached 81.68 million shares, the highest level since the last 60 trading days. 
Tradings value reached Rp27.26 billion as well, the highest level since 60 trading days as, with 1.361 transactions.
Based on data compiled from Indonesia Stock Exchange, during the last 60 trading days, the largest volume was on February 12 2010 of 27,36 million shares, but the highest value reached Rp11.39 billion on January 14 2010.
A stock trader said on the last Friday, both ELSA and BIPI, PT Benakat Petroleum Energy Tbk, rallied. "People think that BIPI starts to collect ELSA from the market in a bid to jack up its shareholding," the trader said.  
BIPI and PT Tridaya Esta (TDE) signed a share sale and purchase agreement of 37.15% stakes in Elnusa on February 10 2010. BIPI has agreed to acquire those shares at Rp330 per share or Rp894.3 billion. BIPI is likely to use bank loans rather than IPO proceed, sending the deal funding more simple than using IPO proceed that must be approved by an extraordinary general meeting.  
In my view, following BIPI's acquisition of 37.15% stakes in Elnusa, BIPI needs to boost its shareholding larger than Pertamina's stakes or at least equal. This is needed to develop Elnusa. PT Pertamina (Persero) holds 41%, the controlling shares in Elnusa.
Based on my experience, Pertamina is Indonesia state-owned largest oil and gas producer, but it is closely related to political's move. I remember when Pertamins's BoD wanted to increase shareholding in Elnusa but BoC disagreed. 
If such problem persists, I am afraid Pertamina, as ELSA controlling shareholder, is unable to guide and develop Elnusa in the future. Pertamina's BoD and BoC are linked to political connection and more often experiencing reshuffle than other state-owned enterprises. New BoD and BoC sometimes mean new strategies and will disadvantages for Elnusa.           
I don't think TDE doesn't has enough money to boost shareholding in Elnusa, but so far it seems happy with 37.15% stakes. It may be related to relations with Pertamina and TDE seems reluctant to outstrip Pertamina's shareholding. I hope BIPI, as a private company, will focus on how to develop Elnusa into a giant integrated oil and gas service company, given its shares are lagging compares its peers.   
According to a research report published by Kim Eng Securities on March 4 2010,the deal will take some time to consummate since Benakat intents to bankroll the acquisition through debt. Kim Eng said the change in shareholding will not affect Elnusa fundamentals.
As of December 2009, Kim Eng estimates that Elnusa net profit would jump to Rp561 billion due to extraordinary income of 49% stakes divestment of PT Infomedia Nusantara to PT Telekomunikasi Indonesia Tbk (TLKM) in June last year.
Elnusa sales last year could reach Rp3.43 trillion from Rp2.54 trillion in 2008. In 2010, Kim Eng calculates that Elnusa sales may jump to Rp4.14 trillion and Rp313 billion of net profit. Kim Eng raises Elnusa target price to Rp450 per share from previously Rp430.

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