May 15, 2011

Multistrada may drop rights issue

One of Indonesia's producers of radial car tire manufacturer PT Multistrada Arah Sarana Tbk (MASA) surged 33.85% to Rp435 per share in the last 2 weeks, the highest level in the last 6 years. At midday break last week, Multistrada jumped 6.10% to Rp435 per share.
A local fund manager said people keeps buying Multistrada as there is a speculation that the company will drop a rights issue plan.
"As at end of September, Multistrada might not hold the rights issue as it had published 1Q financial statement to Indonesia Stock Exchange. If the company intends to hold rights issue, it will use the first half of financial statement," the fund manager said.
Multistrada first quarter result was still positive. The company also has a good story with its expansion plan, said Lanang Trihardian, an investment analyst at local investment management company PT Syailendra Capital, today.
According to him, the valuation of big capitalization stocks is too expensive and investor starts seeking another opportunity with small to medium stocks such as Multistrada and a tire maker PT Gajah Tunggal Tbk.
In February, Multistrada's President Director Pieter Tanuri said the company was considering to hold the rights issue in a bid to boost its working capital. The company would increase its working capital of US$50 million-US$100 million.
Even Goh, Head of Investor Relations at Multistrada, said the rights issue is still an option. "We haven't decided about the rights issue. The financial advisor HSBC will provide us with several best options at end of May," he said.
People believes that Multistrada is owned by two controlling shareholders, Salim Group and Pieter Tanuri.
Disclosure: No position at the stock mentioned above.

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