January 23, 2025
The Good Relationship of Two Tycoons

Market Commentary
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In 2022, PT Indika Energy Tbk. (INDY) has secured fresh funds amounting to IDR 2.19tn from the divestment of a majority stake in PT Petrosea Tbk. (PTRO). The management of INDY announced that the company has sold 69.8 percent of PTRO shares. Indika Energy will transfer its entire ownership of 704,014,200 shares.

According to the share purchase agreement, the transaction will be settled in two installments. A down payment of USD 2.5mn was made on February 25, 2022, based on an exchange rate of IDR 14,355. The remaining purchase price of USD 144.08 mn will be paid in Indonesian rupiah, converted using the exchange rate published in the JISDOR by Bank Indonesia two business days prior to the payment date.

Since then, the share price of PTRO has skyrocketed even after the stocksplit.

PTRO Share Price Performance

This good relationship between the two tycoons continued as they came to an agreement on another deal, MUTU.

INDY has divested its coal mining business, PT Multi Tambangjaya Utama (MUTU). On September 22, 2023, Indika Energy, through its subsidiaries PT Indika Indonesia Resources (IIR) and Indika Capital Investments Pte. Ltd. (ICI), signed a Conditional Share Purchase Agreement (CSPA) with PT Petrindo Jaya Kreasi Tbk (CUAN) as the buyer, concerning the planned sale of 100 percent ownership in PT Multi Tambangjaya Utama (MUTU) to Petrindo Jaya Kreasi.

According to the CSPA, the seller intends to transfer its entire ownership of 2,263,030,000 shares in MUTU, while ICI intends to assign all its rights and obligations under the Marketing Rights Agreement (the planned transaction), with a total transaction value of USD 218mn.

CUAN' Share Price Performance

Recently, there has been speculation that PTRO is planning to acquire a stake in PT Kideco Jaya Agung, a coal mining subsidiary currently owned by INDY. This rumor suggests that INDY, as part of its ongoing divestment from coal-related assets, may sell part or all of its shareholding in Kideco to Petrosea.

The move could align with Petrosea's strategic expansion into the coal mining sector and INDY's broader shift toward renewable energy and non-coal businesses. However, no official statements have been made to confirm these rumors.

If this rumor does materialize in the future, we believe Kideco would enhance PTRO's profitability based on Kideco's 2024 financial performance.
 

As shown in the table taken from Indika's news release, by 9M24, Kideco recorded earnings of USD 117.4mn. If these earnings are consolidated into PTRO's financial performance, this could reduce PTRO's PE ratio from approximately 600x to double-digit multiples.

Therefore,
we encourage investors to stay alert on the acquisition process development as there is lots of potential to be unlocked on PTRO. We believe current decline of the share price was just a matter of technical correction which opens better buying opportunity.



 

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