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Indorama Ventures

Seizing golden opportunity BUY

Indorama Ventures Plc (IVL)

IVL acquires polyester producer in Turkey

- IVL has signed a sales and purchase agreement for the acquisition of

51% of SASA Polyester Sanayi A.S. (SASA), Turkey’s well-known

polyester and PET manufacturer (a listed company on the Stock

Exchange of Istanbul), from Hacı Ömer Sabancı Holding A.Ş. (Sabancı

Holding). IVL will conduct a mandatory tender offer for the remaining

49% of SASA's shares (expected to be completed within 2Q14). SASA

incorporates integrated feedstock and polymer production facilities with

the total capacity of 600,000 tons/year: 260,000 tons/year of DMT (raw

material for polyester fiber), 160,000 tons/year of polyester fiber and

180,000 tons/year of specialty polymers. Located in Adana, a city with

good transportation system, SASA can export its products to Europe, the

Middle East and North Africa.

- Roadmap to raise business value

We have a positive outlook on this acquisition. The acquisition of SASA

would help IVL access new markets with great potential and opportunity.

SASA is a well-known Turkish petrochemical company with clients from

54 countries and over 150 types of products. As Turkey is connected to

Europe, North Africa, Central Asia and the Middle East, it has great

potential to grow both in domestic and international market. Turkey has

captured 13% market share in European polyester fiber market, likely to

expand more. If IVL can hold 100% of SASA’s share, IVL’s production

capacity would increase by 8.5percent from IVL’s current total capacity of 7

million tons/year. We are currently working on up revision of IVL's

earnings forecast; more information about shareholding proportion and

actual value is needed (market capitalization is US$106m or B3.4bn).

- Petrochemical sector’s top pick

We derive IVL’s FY2014 fair value (DCF) at B26, likely to be revised up

due to acquisition of SASA. We reiterate to buy. IVL’s FY2014 net profit

is expected to grow significantly as PTA spread and cotton price are

likely to make a new high.


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