Indorama Ventures
Acquisition of US-based fiber specialty company - a LT positive for IVL
Buy; Bt.29.75
Price Target : Bt36.00; IVL TB
Indorama Ventures Public Company Limited (IVL) reported that its board of directors has approved its acquisition of 100% stake in FiberVision Holdings LLC in Georgia, USA, which produces specialty fiber Mono and Bi component grades. FiberVision has total capacity of 221k tons, of which 117k tons is in US, 90k tons in Europe, and 14k tons in China. FiberVision generates sales volume of US$400-500m in 2011 with estimated profit of US$15m. IVL has already obtained anti-trust approval from the US and EU and expects the deal to be completed by Friday (6 Jan 2012).
Comment:
This acquisition is positive for IVL. While no detail has been revealed, we estimate that the deal should be around US$200m. With over US$370m cash as at end 3Q11, IVL should be able to finance the acquisition internally with some debts.
The specialty fiber normally generates almost twice EBITDA/ton compared to normal fiber EBITDA/ton of US$100/t. The capacity of FiberVision in Europe and US totals 207k tons, representing 30% of market share in these markets. We expect the company to contribute additional earnings to IVL of 3% this year. In our view, this acquisition is value accretive and we maintain our BUY rating and TP of Bt36.
