ANTM’s subsidiary to acquire 30% stake in Tsingshan’s RKEF plant

ANTM’s subsidiary, PT Gag Nikel (PTGN, unlisted), has announced a 30% stake acquisition of a Tsingshan-owned RKEF (Rotary Kiln-Electric Furnance) company, PT Jiu Long Metal Industry (JLMI, unlisted), a 28ktpa RKEF plant producing NPI (Nickel Pig Iron). This acquisition will be done through JLMI’s current sole owner, Newton International Investment (NII, unlisted) as a seller, which is also a subsidiary of Tsingshan (unlisted). The details of the deal are below:

• As part of the transaction, PTGN has entered into an ore supply agreement with Universal Metal Trading (UMT, a Tsingshan subsidiary, not listed), under which ANTM will supply ore to UMT in exchange for a prepayment
• A part of the proceeds from the prepayment will be used to fund the acquisition of JLMI.

• Post-transaction, JLMI (RKEF plant) will be 70%-owned by NII (a Tsingshan subsidiary) and 30% by (PTGN) (an ANTM subsidiary).
• Following the acquisition, the RKEF business’s current USD60mn in shareholders’ loan to NIIwill be reduced to USD42mn, with PTGN also issuing a USD18mn shareholder loan to reflect the respective ownership percentage.

Ultimately, we believe this transaction will benefit the two parties. Tsingshan will secure its ore supply needed to keep its operation whereas ANTM will get to secure ore sales demand, on track to achieve its ore sales goal for the year.

Value accretion to boost FY25F NPAT by up to +4.2%

Compared to USD74mn of NPAT in 2023, we assume JIML would record an NPAT of USD37mn in FY24-FY25F derived from: 1) a ~16% y-y reduction in NPI price for FY24F, and 2) a typical sensitivity of every 1% drop in NPI reflecting a ~3% drop in NPAT. Assuming an NPAT of USD37mn for FY25F, we believe the deal implies a 9x P/E multiple (vs ANTM’s current P/E of ~11.7x FY25F), making the transaction value-accretive. Post-transaction, we expect ANTM’s NPAT to improve by +4.2% in FY25F.

We maintain our Buy rating for ANTM with a TP of IDR1,900, based on a FY25F SOTP valuation, using DCF for gold, nickel, and other segments of the company. Given the current nickel ore shortage, we favor upstream companies that likely stand to benefit from this situation (see report). ANTM is currently trading at ~11.7x FY25F P/E, vs. mid-teens P/E for nickel peers. Downside risks include commodity price volatility, delays in production, and regulatory changes.

Fig. 1: ANTM’s acquisition of JLMI, a Tsingshan-owned subsidiary

Fig. 2: ANTM— Estimated NPAT for FY25F

Fig. 3: NPI acquisition values

Fig. 4: ANTM’s five-year P/E band

Fig. 5: ANTM’s flow chart and weightings

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Michael Wildon Ng (michael.wildon@verdhana.id)

Edward Prima (edward.prima@verdhana.id)