Kideco stake increase and rationale    Indika announced to enter into an agreement to increase its stake in Kideco by45% by buying stake from existing holders, Samtan (40%) and PT Muji IntiUtama (5%), for an aggregate consideration of USD677.5million. Posttransaction completion, Indika will own 91% in Kideco with remaining 9% heldby Samtan. Aggregate consideration translates to an enterprise valuation ofUSD1.3billion (adjusted for cash balance at Kideco which was USD199millionat the end of 1H17). This comes to EV/EBITDA of ~2.3x compared to ~3.5-4.5xfor other domestic listed players (based on annualized 1H17EBITDA).    Indika’s intention to increase stake in Kideco has been in news in past andrecently made headline again in local press late last month. So what wasdifferent this time more so as valuation does looks rather attractive fromIndika’s perspective? We have not been able to speak to the company but dothink that recent policies around mining/O&G contract renewal may have hadsome impact on the transaction completion especially as Kideco’s CCOW iscoming for renewal in 2023.

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