IVL:TB - Indorama Ventures

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Indorama Ventures  - IVL:TB 

Market capt : ~$2.6 billion

Revenue 2012 : ~$7 billion

Locations:  North America, Europe , Asia, South Africa

 

Indorama Ventures Public Company Limited is one of the largest vertically integrated polyester chain producers in the world and a leading global manufacturer of wool yarns.

 

This company run by Lohia family from India but it is listed in Thailand Stock Exchange. It is a truly global company. They try to dominate the Polyester chain industry around the world the same way the Mittal family have done with steel industry .

 

http://img266.imageshack.us/img266/817/vwc.png

 

 

IVL was a Doug Barnett's favorite stock back in 2007-2010 .  They made 1000% gain in this stock during that period. And his fund name reappear as a major shareholder list in IVL again this year. 

Look at 33:00 minute

 

To sum it up, what IVL have done and will continue to do so is to buy a distressed plant  (PET,MEG,PTA,Polyesters)  and reduce cost, improve the capacity of the plant  to turn it around. It is basically the same things that made the Mittal the king of steel industry.

 

This year they made a acquisition in Nigeria.    In 2010, the stock was at 60 baht per share due to the product shortage that result in sky-high profit margin for that year.  The revenue almost double from 2010 but profit margin has been compressed due to tight competition in Asia region.  They also has EO/EG plant in US which is profitable because the competition in North America is not as fierce as in Asia.  And the plant there benefit from low natural gas price.  During the Q1 and also continue in Q2 , the plant in US has to change the catalyst to improve the production . But with new catalyst ,this plant will contribute a large sum of profit.

 

 

The company has a good public disclosure and they hold an opportunity day conference every Q . Here is the recent one.

 

http://www.dcs-digital.com/setweb/ondemandnew.php?onid=1581&&size=b

 

The key takeaway is CEO think they have seen the bottom of the industry . And the PTA producers from China who have higher cost structure are temporary shutdown the plant .Because it is not economically for them the to sell the PTA below the cash cost.

 

IVL went to the road show in USA last month and the respond from fund manager there was good. Here is good research writeup from CIMB securities

 

http://www.cimbsecurities.co.th/backoffice/data/files/130619_Flash%20Note_IVL.pdf

 

The share price is hitting a  4-years low due to emerging market selloff and investor get rid of declining profit companies at first when they are in panic.

 

There is an estimation that IVL will reach $10 billion in revenue within next 2-3 years. And the normalised %npm should be around 3%  or in good market condition it can reach 5%.  That is the PE of 5-9x at this price level.