JAKARTA (IFT) - PT Ancora Indonesia Resources Tbk (OKAS), a coal mining company, is seeking a US$ 20 million-US$ 30 million loan to finance acquisitions. This is due to the delay in issuing new shares without preemptive rights (rights issue) which was originally scheduled this month.
Dharma Djojonegoro, Director of Ancora Indonesia, said that the company is eyeing several banks, the names of which were not disclosed. Ancora seeks alternative financing in the form of a loan as it wants to acquire a number of mining companies in addition to PT Raja Kutai Baru Makmur in East Kalimantan. Furthermore, since rights issuance can only be done once every year, the company considers to conduct multiple acquisitions before making a stock offer.
"That way, the bid can be higher—more attractive to capital markets," he said Tuesday.
According to Darma, the delay is due to the company’s ongoing due diligence on the corporate action—the result of an audit completed last month.
In addition, the company’s current share price is not of optimum value for a rights issue yet. In Tueasday’s trade, Ancora Resources’ shares closed at to Rp 320, a Rp 15 (4.92 percent) increase.
Dharma was unwilling to say which mines to acquire."We are basically looking for mines that can be expanded, either with the seller or just by Ancora," he said.
Ancora Resources originally planned to conduct a rights issue worth US$ 12 million-US$ 15 million to acquire 50.6 percent of Raja Kutai’s shares. Aulia Oemar, Finance Director of Ancora, said that the acquisition was completed in the second quarter of 2011. For the rights offering and the acquisition, Ancora is using financial statements from December 2010. However, Aulia refused to mention the percentage of shares to be issued.
Ancora will buy 50.6 percent (out of a 58 percent total) of Raja Kutai’s shares owned by Ancora Energy worth US$ 0.6 per ton of coal reserves. The minimum payment is US$ 10.5 million and the maximum is US$ 24 million.
Raja Kutai’s production is targeted to increase in the third quarter of 2011 to 100 thousand-150 thousand tons of coal per month. 2011’s first quarter production was 70 thousand tons per month.
All of Raja Kutai’s coals will be exported—mainly to China and India with a selling price of US$ 32-US$ 35 per ton (free on board). Raja Kutai has 500 hectares of concession area with proven reserves of around 9 million-15 million tons.
During the first quarter of 2011, Ancora Resources earned Rp 289.64 billion revenue, a decrease compared to same period last year (YOY) of Rp 359.63 billion. However, the company’s net profit increased to Rp 4.07 billion from Rp 1.78 billion, triggered by assets sales and exchange rate profits.
According to the IFT Research Department, a new debt of US$ 30 million would make Ancora’s debt-to-equity ratio to increase to 2.38 from 1.81. Ancora’s EBIT/Interest Expense ratio is 0.99, indicating it is almost equal to the amount of its interest expense. Therefore, the company must maintain profit growth so as not to erode earnings from the additional debt.
Based on its plan for equity financing, the company’s assets will automatically increase. Ancora must at least post Rp 5.02 billion quarterly net profit in order to keep its 0.33 percent first quarter return-on-assets from going down. (*)
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