Indorama Ventures

Indorama Ventures Plc (IVL) 

 

- Acquire PET company in Thailand, PTA company in Canada 

 

IVL have acquired two M&A deals of Thai and overseas companies:  1) Project Boston – IVL has acquired 94.91% stake in Bangkok Polyester 

 

PCL (BPC) with 105,000 tons/year PET production capacity, thus boosting IVL's PET production capacity in Thailand by 63.7% to 393,000 ton/year.  

 

2) Project Lion – IVL has acquired 100% stake in CEPSA Chimie Montréal s.e.c, Canada's biggest PTA producer with 600,000 tons/year PTA production capacity, making IVL an integrated PET manufacturer in North America. 

 

IVL used its cash flow from operation on the acquisitions, which is enough not to hurt its financial status. IVL plans to acquire two more projects in 2H15. 

 

- Revise up forecast by 7% in 2015, 10% in 2016 

 

We revise up IVL's FY2015-2016 earnings forecast to reflect higher profit from the acquisitions of the two new companies. Given that IVL will start booking profit from the two newly-acquired companies for the first time in 2H15 and for a full year in 2016, with net profit of US$15/ton and US$30/ton, respectively, IVL's net profit is estimated to soar by over 100%yoy to B4.5bn in 2015 and leap by 46.7%yoy in 2016 as sales volume is expected to rise and make yearly new highs. 

 

- New fair value is B32 

 

We recommend BUY. Under the new forecast, FY2015 fair value (DCF, 11% WACC) is revised up from B30.50 to B32. Despite unattractive dividend, IVL is projected to make new highs in the next few years.