Nov 14, 2010

Titan Kimia, mysterious tender offer

Titan International Corp Sdn, a 72.32% controlled by Honam Petrochemical Corporation, on last Thursday  or November 11 2010 launched a tender offer for the remaining 9.6% stake or 534.13 million shares in PT Titan Kimia Nusantara Tbk (FPNI).
The tender offer, will be scheduled on December 3 2010 to December 5 2010, is following the acquisition of majority stake in Titan Kimia Nusantara.
For those who receive the tender offer, Titan International will buy their stakes in Titan Kimia Nusantara on December 22 2010.  
Still, Titan International hasn't disclose the price, leaving mysterious tender offer. As a result, the day when the tender offer was announced, Titan Kimia shares steeply surged on a market speculation that the tender offer price would be higher than the current level.
Based on the official announcement, the tender offer price equals to the average of FPNI's highest level during the last 90 trading days before the tender offer announcement, on November 11 2010.
Referring to the statement, it means Titan International might buy FPNI shares during the tender offer at Rp130 per share, far below the current market price.
I have tried hard to contact person in charge for the tender offer at Titan Kimia. But, I am still unable to reach the key person.
In red earning    
During the first 9 months ended September 30 2010, Titan Kimia posted US$20.33 million net loss and U$22.37 million operating loss. Revenue reached US$319.21 million.
If you look quarterly result, Titan Kimia's net loss in the third quarter of 2010 continually shrank from US$5.69 million in 1Q 2010, US$12.98 million in 2Q, and US$1.66 million in 3Q.
Operating loss also steeply reduced from US$6.30 million in 1Q 2010, US$12.78 million in 2Q, and US$3.29 million in 3Q 2010.
But, revenue slightly fell from US$111.03 million in 2Q to US$108.44 million in 3Q 2010. In the 1Q 2010, Titan Kimia booked US$99.74 million revenue.
Titan Kimia Nusantara is a producer of bi-axially oriented polypropylene (BOPP film) and polyethylene. In the second quarter of 2010, Titan Kimia's net sales came from US$22.39 million polyethylene to related parties, US$176.43 million polyethylene and US$11.95 million BOPP film to third parties.
Titan Kimia vs Indopoly 
Titan Kimia's September result was contrast with performance of another BOPP film producer PT Indopoly Swakarsa Industry Tbk (IPOL), which reported a strong growth in net income in the first 9 months of this year as a result of higher sales.
Indopoly posted Rp152.88 billion net income or Rp34.13 per share in 9M 2010, a 105.43% jump from Rp74.42 billion or Rp41.69 per share in 9M 2009.
Income from operations skyrocketed 198.63% from Rp75.13 billion in 9M 2009 to Rp224.36 billion in 9M 2010.
Cost of goods sold increased 23.23% from Rp677.38 billion in 9M 2009 to Rp834.73 billion in 9M 2010. Sales elevated 36.12% from Rp872 billion in 9M 2009 to Rp1.19 trillion in 9M 2010.   
So, the question is what's wrong with Titan Kimia's performances, suffering three consecutive net loss?

Disclosure: No position at the stock mentioned above.  

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