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UBS Investment Research
Lanco Infratech
Perdaman case, price correction overdone
„ Event: Perdaman filed a lawsuit against Lanco in Australia, stock corrects
Lanco Infratech’s (Lanco) share price corrected sharply on Friday on media reports
that Perdaman Industries had filed a lawsuit against the company in Western
Australia. According to media reports, the lawsuit is related to a coal supply
agreement between Griffin Coal (Griffin) and Perdaman, and a hearing is expected
on 27 July. In February 2011, Lanco acquired Griffin coal mines in Australia for a
consideration of A$730m. Perdaman’s urea plant in Western Australia, to be
completed in FY15 according to Perdaman, was to receive its coal supply from
Griffin mines.
„ Impact: Perdaman seeking damages of A$3.5bn
As per media reports, Perdaman is seeking damages of A$3.5bn. As per Lanco,
Perdaman has not yet filed the basis of this claim with the Australian court, or how
it arrived at the figure of estimated damages. Lanco has confirmed that once the
company has clarity on this, it will defend this. However, Lanco management
indicated it thinks the case does not have any merit, as the coal agreement has not
yet been terminated.
„ Action: we think the price correction is overdone
We checked the timeline of Perdaman’s project and it is expected to be completed
in December 2014. We believe that the fuel requirement (from Griffin mines to
Perdaman’s plant) should arise only after the plant becomes operational. We think
the price correction on the back of the court case news on Friday seems overdone.
„ Valuation: maintain Buy rating and price target of Rs70.00
We derive our price target using a sum-of-the-parts methodology. We value Lanco
as a conglomerate, with power contributing 68% of our valuation and EPC 23%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Lanco Infratech
Perdaman case, price correction overdone
„ Event: Perdaman filed a lawsuit against Lanco in Australia, stock corrects
Lanco Infratech’s (Lanco) share price corrected sharply on Friday on media reports
that Perdaman Industries had filed a lawsuit against the company in Western
Australia. According to media reports, the lawsuit is related to a coal supply
agreement between Griffin Coal (Griffin) and Perdaman, and a hearing is expected
on 27 July. In February 2011, Lanco acquired Griffin coal mines in Australia for a
consideration of A$730m. Perdaman’s urea plant in Western Australia, to be
completed in FY15 according to Perdaman, was to receive its coal supply from
Griffin mines.
„ Impact: Perdaman seeking damages of A$3.5bn
As per media reports, Perdaman is seeking damages of A$3.5bn. As per Lanco,
Perdaman has not yet filed the basis of this claim with the Australian court, or how
it arrived at the figure of estimated damages. Lanco has confirmed that once the
company has clarity on this, it will defend this. However, Lanco management
indicated it thinks the case does not have any merit, as the coal agreement has not
yet been terminated.
„ Action: we think the price correction is overdone
We checked the timeline of Perdaman’s project and it is expected to be completed
in December 2014. We believe that the fuel requirement (from Griffin mines to
Perdaman’s plant) should arise only after the plant becomes operational. We think
the price correction on the back of the court case news on Friday seems overdone.
„ Valuation: maintain Buy rating and price target of Rs70.00
We derive our price target using a sum-of-the-parts methodology. We value Lanco
as a conglomerate, with power contributing 68% of our valuation and EPC 23%.
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