SOEs ready to absorb rights issue funds

JAKARTA. State owned enterprises (SOEs) issuers are ready to absorb rights issue funds obtained in the last year. One of the SOEs, PT Jasa Marga Tbk (JSMR) will immediately allocate the rights issue funds to construct toll road.

Financial Director of JSMR Anggiasari Hindratno mentioned that JSMR obtained Rp 1.7 trillion rights issue funds. This issuer will allocate 50% of the funds to construct Semarang-Batang toll road with a length of 75 kilometer (km). Meanwhile, 30% of the rights issue funds will be allocated to construct Pandaan-Malang toll road with a length of 37.6 km.

The rest 20% of funds will be allocated to construct Jakarta-Cikampek II toll road. Anggiasari even said that the rights issue funds may be completely absorbed if JSMR can succeed in bidding process for South Cikampek toll road.

Meanwhile, PT Krakatau Steel Tbk (KRAS) said that as much as Rp 1.8 trillion rights issue funds will immediately flow to the issuer. KRAS will use 66% of the funds to fulfill the needs of working capital for hot strip mill 2 construction project worth US$ 381.8 million.

The factory is expected to operate in semester I-2019. This project will increase the steel rolling production capacities from 2.4 million ton per year to 3.9 million ton per year.
KRAS will also use 34% of the funds as equity for the construction project of coal power plant with the capacity of 1x150 megawatt (MW). With the investment value of Rp 2.3 trillion, the power plant is scheduled to operate in 2019.

Financial Director of KRAS Tembok Setyowati said the rights issue funds will be absorbed gradually. “To date, the electricity project is being tendered,” he said.

Corporate Secretary of KRAS Iip Budiman added, the rights issue funds will not be allocated in the early of this year. The funds allocation will be waiting for the completion of administrative process of electricity project, as well as the completion of hot strip mill project’s detailed design.

Another SOEs issuer, PT Wijaya Karya Tbk (WIKA) will allocate rights issue funds to the needs of working capital for infrastructure projects, which become government’s priorities. The projects include the constructions of several toll roads, power plants, and industry zones.

Limited public offering has generated Rp 4.4 trillion funds for PT PP Tbk (PTPP). PTPP will encourage its subsidiaries to conduct similar corporate actions.

Analyst at Danareksa Sekuritas Lucky Bayu Purnomo said, in terms of the fundamentals, JSMR and WIKA have become more attractive after the rights issue. “JSMR products are mass products and in line with government’s economic policies so that it has attractive prospects,” Lucky said.

In a research dated on 4 January 2017, analyst at UOB Kay Hian Adrianus Bias Prasuryo said, the rights issue funds that amounted to Rp 6.1 trillion have increased the leverage of WIKA. WIKA also achieved the target of new contracts, thanks to Jakarta LRT and high speed railway (HSR) projects. “After the rights issue, debt to equity ratio of WIKA was only around 0.32 times. WIKA has more opportunities to find other funding sources to launch expansion,” Adrianus said.

Therefore, Adrianus recommends ‘buy’ for WIKA’s shares, with the target price of Rp 2,900 per a share. Lucky also recommends ‘buy’ for WIKA’s shares with the target price of Rp 3,550 for every share. Lucky recommends ‘buy’ for KRAS’ shares with the price target of Rp 850 per a share. (Muhammad Farid/translator)