Indorama Ventures

Indorama Ventures Plc (IVL)

IVL acquires polyester producer in Turkey

- IVL has signed a sales and purchase agreement for the acquisition of
51% of SASA Polyester Sanayi A.S. (SASA), Turkey's well-known
polyester and PET manufacturer (a listed company on the Stock
Exchange of Istanbul), from Hacı Ömer Sabancı Holding A.Ş. (Sabancı
Holding). IVL will conduct a mandatory tender offer for the remaining
49% of SASA’s shares (expected to be completed within 2Q14). SASA
incorporates integrated feedstock and polymer production facilities with
the total capacity of 600,000 tons/year: 260,000 tons/year of DMT (raw
material for polyester fiber), 160,000 tons/year of polyester fiber and
180,000 tons/year of specialty polymers. Located in Adana, a city with
good transportation system, SASA can export its products to Europe, the
Middle East and North Africa.
- Roadmap to raise business value
We have a positive outlook on this acquisition. The acquisition of SASA
would help IVL access new markets with great potential and opportunity.
SASA is a well-known Turkish petrochemical company with clients from
54 countries and over 150 types of products. As Turkey is connected to
Europe, North Africa, Central Asia and the Middle East, it has great
potential to grow both in domestic and international market. Turkey has
captured 13% market share in European polyester fiber market, likely to
expand more. If IVL can hold 100% of SASA's share, IVL's production
capacity would increase by 8.5% from IVL's current total capacity of 7
million tons/year. We are currently working on up revision of IVL’s
earnings forecast; more information about shareholding proportion and
actual value is needed (market capitalization is US$106m or B3.4bn).
- Petrochemical sector's top pick
We derive IVL's FY2014 fair value (DCF) at B26, likely to be revised up
due to acquisition of SASA. We reiterate to buy. IVL's FY2014 net profit
is expected to grow significantly as PTA spread and cotton price are
likely to make a new high.