Daewoo Securities on Semen Indonesia: Disturbed by uncertainties

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By Mimi Halimin 
According to multiple press reports today (October 11th, 2016), the Supreme Court is known to have approved the  judicial review submitted by the plaintiff (Joko Priyanto and 6 people from Rembang and The Indonesian Forum  for the Environment, WALHI) regarding the “Environmental License on The Establishment of Cement Factory in  Rembang” which is owned by Semen Indonesia (SMGR IJ). Following the outbreak of the news (intra session),
SMGR’s share price plunged to IDR9,650 before finally closing at IDR10,000 on October 11th, 2016 (-2.91% DoD).
We consider the news to be discouraging as Rembang plant was scheduled to be operational next year – adding the company’s installed capacity by 3mn tonnes. SMGR is projected to have additional capacity of 6mn tonnes in 2017 from Indarung plant (Padang, West Sumatra) and Rembang Plant (Rembang, Central Java). In the event SMGR were to finally lose the case, the worst case scenario would be the closure of its Rembang plant, next year.
However, according to the company’s filing on IDX, SMGR disclosed that they are unable to provide further explanation as they are pending the official announcement from the Supreme Court. We will revisit this issue upon receiving clear explanation from the company. This should keep uncertainties elevated for the time being.
On the flip side, the cancellation of 3mn tonnes capacity may prove to be positive for the broader cement industry, in our view, given the supply and demand imbalance (i.e., the cement industry is facing severe oversupply situation).
We reiterate our Hold recommendation on SMGR with a target price at IDR10,200.

 

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Source: The Insiderstories
Daewoo Securities on Semen Indonesia: Disturbed by uncertainties

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