Sep 22, 2014

Peter Sondakh & BW Plantation backdoor listing

Tjipto Widodo, former president commissioner of PT BW Plantation Tbk (BWPT), won't see that BWPT may become a company with market capitalization of Rp15 trillion-Rp16,3 trillion soon. Tjipto, the fourth son of Budiono Widodo,  and owner of BW Plantation, fled his position in June 2014 following the shares sale of the company to two special purpose vehicles (SPV) dubbed Matacuna and Pegasus CP One, controlled by Peter Sondakh, via PT Rajawali Corpora.
It is the opening lead of my article about BW Plantation's backdoor listing at Bloomberg Businessweek Indonesia magazine published this week. Please view the video as well. Here is also video at Bloomberg TV Indonesia.
Why I used such a dramatic opening lead?
It was in mid 2010 when Tjipto Widodo allowed me to have a precious interview with him at his office at Menara Batavia, Jakarta. I was still working for a local daily business newspaper when Tjipto revealed his hope, bringing BW Plantation to be a US$1 billion market capitalization company. At that time, he conveyed his long term commitment to lead BW Plantation as well.
You can check my article here. At that time, BW Plantation still had a US$390 million market capitalization with palm oil planted area of 15,270 hectares. So, using the assumption of planted area and market capitalization, Tjipto was optimistic that BW Plantation's market cap may reach US$1 billion in 2014.
I am familiar covering BW Plantation. I have good relationship several executives at the company. Then, in December 2013, there were shares placements to Matacuna and Pegasus One. Market speculation arouse that Rajawali took over BW Plantation. For me, it was not surprising as Rajawali did the same thing (backdoor listing) with two companies namely PT Nusantara Infrastructure Tbk (META) and PT Golden Eagle Energy Tbk. (SMMT), previously PT Eatertainment International Tbk.
I also heard from an investment banker that Rajawali obtained a US$1 billion loan facility arranged by Credit Suisse. It was also Credit Suisse that advised Rajawali on PT Bentoel Investama Tbk (RMBA) sale to BAT.
After 8 months, since the takeover by Matacuna and Pegasus one, both SPVs, registered on behalf of Credit Suisse's custodian, disclosed that the beneficial owner of both SPVs is Peter Sondakh through PT Rajawali Corpora.
The questions is why Matacuna and Pegasus One did not disclose the beneficial owner soon after the acquisition in December 2013? How about Rajawali's plantation assets?
Fund managers in the market said the backdoor listing is so expensive for BW Plantation. With the takeover of US$900 million-US$1 billion, the valuation is about 15x price to earning ratio, higher than the average CPO industry of 12x. However, there is always a price for better quality asset.
Peter Sondakh aims to inject 71,631 hectares of planted area owned by Green Eagle Plantations and 5,504 hectares of planted area owned by Rajawali Corpora. Green Eagle has an estimated land bank of 30,000 hectares and Rajawali Corpora owns 87,500 hectares of land bank. As of June 2014, BW Plantation is estimated to have 70,146 hectares of planted area with estimated land bank of 9,000 hectares.
Post rights issue and takeover, BW Plantation is estimated to have 147,280 hectares of planted area and 126,500 hectares of land bank, putting the company as the third largest market capitalization following PT Astra Agro Lestari Tbk (AALI) and PT Sinar Mas Agro Resources and Technology Tbk (SMAR).
Initially, Peter Sondakh had a partner dubbed Louis Dreyfus Commodities, a giant global commodity player, in Green Eagle Plantation. In 2011, Dreyfus acquired a 50% stake in Green Eagle at US$182 million or US$364 million for the whole stake. However, in 2014, Dreyfus disposed the stake to Rajawali at undisclosed price. In 2013, Green Eagle recorded a 179.21% jump in revenue from 2011 and a 7,546% leap in net profit. Lets compare the performance with PT Dharma Satya Nusantara Tbk (DSNG) that has similar profile of planted area with Green Eagle. However, Green Eagle had higher net margin than Dharma Satya in 2013. 
Despite the better performance and more expensive valuation, could Rajawali bring BWPT shares price higher such as META and SMMT shares? 

Disclosure: No position at the stock mentioned above. 

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