Indorama Ventures

Indorama Ventures Plc (IVL)

- Acquire additional PET business in Turkey
IVL has acquired 100% stake of Artenius TurkPET A.S. (Artenius), a PET
producer in Adana, Turkey with capacity of 130,000 tons a year, with
investment cost of B1.6bn, aiming to increase its market share in Turkey
since Artenius is a profitable company and Turkey is a potential market
with rapid demand growth given over 76 million consumers, in line with
GDP growth forecast of Turkey at 3.0% in 2014 and 4.0% in 2015.
Moreover, with its location in Eurasia, it will be able to penetrate Asia,
the Middle East, North Africa, and Southern Europe easily through both
land and marine transportation. Europe is a major market for Turkey’s
PET and polyester export with GDP growth forecast of 1.6% in 2014 and
2.0% in 2015, versus -0.4% in 2012 and 0.1% in 2013. Furthermore,
the investment in Turkey is one of IVL’s strategies to become a world
class leader in the business and strengthen its competitiveness.
- Substantial upside for Artenius’ profit after acquisition
We have a positive outlook toward the acquisition because it is the
second business base expansion to highly potential market following the
acquisition of SASA Polyester Sanayi A.S. (SASA), a leading PET and
polyester company in Turkey listed on Istanbul Stock Exchange, on April
9, 2014. The acquisition of the two businesses in Turkey has made PET
production capacity of IVL in Turkey 245,000 tons a year, or 6.8% of
IVL’s total capacity of 3.6 million tons a year. In addition, PET spreads in
Europe and America are US$50-100/ton higher than the spread of
US$300/ton in Asia, so this is a positive factor for the profit growth in
the long run. Substantial profit upside is foreseen for Artenius after the
acquisition.
- Top pick of sector
2014 fair value, DCF, is B30/share. We reiterate to buy IVL for longterm
continuous and good profit growth in 2014 onward.