Taiheiyo Cement Corp signs MoU with Solusi Bangun Indonesia

PT Semen Indonesia Tbk (SMGR), together with its affiliate PT Solusi Bangun Indonesia Tbk (SMCB), signed a memorandum of understanding (MoU) with Taiheiyo Cement Corp (TCC) on 21 April 2020. The initial agreement is to carry out investment and strategic cooperation between the parties. It includes an investment plan by TCC in SMCB, an agreement on exports to TCC and a partnership plan with TCC.

The investment referred to in the MoU is related to the TCC's plan to make an investment in SMCB with SMCB of US$220m.

"The implementation of TCC's  investment in the SMCB is planned to be carried out through a rights issue, or capital increase with the right to pre-order securities," wrote Andika Lukmana, corporate secretary of Bangun Indonesia Solutions, in an official statement on 22 April 2020.

Andika also said that the MoU includes SMCB to carry out export activities of its production to TCC. This clause will still be regulated in a definitive agreement to be finalised at a later stage. Still based on the MoU, Andika said that the parties plan to enter into partnership related to cooperation and share research, development, and technology in connection with their respective production business activities.

"By signing the MoU, the company will build a strategic partnership that is expected to strengthen and improve the Company's position in carrying out its business activities," concluded Andika.

Reporting by Bloomberg, RHB Securities analysts Andrey Wijaya, Fauzan Djamal, and Ryan Santoso said Taiheiyo Cement would take at least 15 per cent ownership in SMCB. "Semen Indonesia Group (SIG) will still be the majority shareholder. This transaction will increase the exposure of  SGI in regional markets and improve its capital structure," added Mr Wijaya.

Andrey, Fauzan, and Ryan recommended buying SMGR shares with a target price of IDR9500 (US$0.61)/share.