Indofood Agri

Indofood Agri: 90% owned subsidiary, PT SIMP has submitted an IPO application for up to 3.16b shares (20% of post enlarged share cap). Post listing, IFAR’s sh/h in SIMP will be reduced to 72%.
An EGM will be held on 28 Apr 11, and commencement of the IPO offering period could be around 30 May, with listing of new shares to take place around 9 Jun...

The listing will help to, i) pare down gearing to reduce interest expense and better position for potential expansion/M&A opportunities, ii) fund acquisition of agri-related assets, e.g., sugar, wheat, oil palm from Salim Group, iii) reduce forex risks as group operations are mostly in rupiah, iv) facilitate the payment of future dividends as tax treaties btwn Spore and Indonesia will allow the withholding tax rate on dividends to be reduced from 20% to 10%...

Street notes the new listing will be dilutive, and there may be share overhang concerns giving switching out of IFAR into SIMP which offers more direct exposure to group operations.
But these may already have been priced in given the recent share price underperformance. Moreover, there could be re-rating catalysts if this marks the next phase in growth for the company.
CIMB cuts TP to $2.73 from $3.
UBS, Nomura maintain at Buy with $3.10, $3.40 TP.