Oct 13, 2011

Adaro buys Servo Meda Rp200 bio

PT Adaro Energy Tbk (ADRO)  announced that its subsidiary PT Alam Tri Abadi (ATI), acquired 35% stake in PT Servo Meda Sejahtera (SMS) for Rp200 billion from PT Servo Infrastructure (SI). 
Garibaldi Thohir, CEO of Adaro Energy, in a morning note published by PT Mandiri Sekuritas today, said that it is part of  the company’s strategy in developing coal mining asset in South Sumatra, which creating long term sustainable complete integrated value chain.
Who is Servo? 
Servo Meda is a privately integrated coal mining services company that established in the idea of developing transportation solution to South Sumatra region. Through its subsidiary, PT Servo Lintas Raya, Servo develop and construct 228 km haul road in South Sumatera for coal transportation that will connect the mines in Lahat, Muara Enim and Banyuasin regencies with terminal in Tanjung Lago at Banyuasin river. 
The 1st construction stage has started since October 2008 and It has a capacity target of 50 million tons of coal in the fourth or 50 years of its operation. 
Servo also owns coal mines in Lahat regency including PT Batubara Lahat, PT Bumi Merapi Energy and PT Bara Alam Sumatera which also have legal issue with PTBA. It produced about 3 million tons of coal per year. Servo also has coal mines in Lokpaikat and Bungur in South Kalimantan with a total production 
of 2 million tons of coal per year.
"We expect It is part of series transaction with the recent 75% stake coal asset acquisition of Mustika Indah Permai (MIP). Altogether Adaro coupling local partners in Lahat region to strengthen its position to leverage its inorganic growth by unlocking abundant “coal treasure” in South Sumatra."
However it remains a long time story to talk about the development of their projects since it is still in a legal case with PTBA which most of their concessions are halted in the meantime waiting for final decision from supreme court. 
Please be mindful, with recent alert of La Nina weather risk from Australia’s Berau of Meteorology that is expected to strengthen earlier than expected, it will be challenging issue for Adaro’s Tutupan mine pit which might affect its mining operation if not well anticipated. "Currently we have Buy rating on ADRO. It trades at 9.0x PER12F. "

Disclosure: No position at the stock mentioned above.  

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