TEXT-S&P summary: PT Gajah Tunggal Tbk.

(The following statement was released by the rating agency)

Aug 30 -

===============================================================================

Summary analysis -- PT Gajah Tunggal Tbk. ------------------------- 30-Aug-2012

===============================================================================

CREDIT RATING: B/Positive/-- Country: Indonesia

Primary SIC: Tires and inner

tubes

===============================================================================

Credit Rating History:

Local currency Foreign currency

08-Nov-2010 B/-- B/--

07-Aug-2009 B-/-- B-/--

23-Jul-2009 SD/-- SD/--

15-Jun-2009 CC/-- CC/--

20-Apr-2009 CCC+/-- CCC+/--

===============================================================================

Rationale

The rating on PT Gajah Tunggal Tbk. reflects the company's aggressive capital structure,

exposure to the cyclical and competitive tire manufacturing industry, and limited financial

flexibility. Gajah Tunggal's competitive cost position and leading share in the Indonesian tire

market temper these weaknesses. We assess the company's business risk profile to be "weak" and

its financial risk profile to be "highly leveraged," as our criteria define these terms.

We expect Gajah Tunggal's financial risk profile to strengthen to "aggressive" over the next

12-18 months. We forecast that the company's debt-to-EBITDA ratio will decline to less than 3x

in 2012, and to below 2.5x in 2013, under our base-case scenario. Gajah Tunggal's debt-to-EBITDA

ratio, at about 2.6x for the 12 months ended June 30, 2012, was better than we had expected due

to a better-than-anticipated improvement in EBITDA margin and higher revenue growth. EBITDA for

the first half of 2012 was about 60% of our full-year projection of Indonesian rupiah (IDR) 1.65

trillion.

We expect Gajah Tunggal's revenue growth to moderate somewhat in the second half of 2012.

The full effect of Indonesia's new regulation on down payments on cars and motorcycles purchased

on credit will kick in from the third quarter. This could moderately weaken the volume of

non-replacement tires for the original equipment manufacturers market. Nevertheless, we believe

the company's margin will remain generally favorable given lower natural rubber prices. Recent

reports suggest that large Southeast Asian rubber producers could curb supply. This may push up

prices temporarily, but the generally weak global macroeconomic outlook will likely deter

permanent and substantial increases in rubber prices over the next six to12 months, in our view.

Still, the sector's improved profitability could trigger a more intense price competition to

garner market share given domestic tire manufacturers' improved margins. Gajah Tunggal's EBITDA

margin increased to 15% in the six months ended June 30, 2012, from 11% in the same period of

2011.

We still need a better understanding of Gajah Tunggal's growth strategy for 2013-2015, and

of how different funding options could affect the company's leverage. Gajah Tunggal acquired a

parcel of industrial land for about US$108 million in the second quarter of 2012. While high,

the amount seems to reflect the current prices in the area. The company plans to increase its

production of truck and bus radial tires over the next three years.

Liquidity

Gajah Tunggal's liquidity is "adequate", as defined in our criteria. We expect the company's

liquidity sources to exceed its liquidity uses by about 1.2x in the next 12 months. Our

liquidity assessment incorporates the following factors and assumptions:

-- Sources of liquidity include our expectation of funds from operations (FFO) of IDR1.1

trillion-IDR1.2 trillion over the next 12 months and Gajah Tunggal's cash balance of IDR677.2

billion as of June 30, 2012.

-- The company also has about IDR181 billion in short-term investments. But we only consider

50% of the value of these investments in our liquidity assessment to reflect their possible lack

of marketability.

-- We believe Gajah Tunggal's 25.5% stake in Jakarta stock exchange-listed PT Polychem

Indonesia Tbk. (not rated) as of June 30, 2012, provides marginal additional support

to the company's liquidity.

-- Uses of liquidity include our expectation of working capital requirements of IDR250

billion-IDR300 billion and capital expenditure of about IDR500 billion-IDR600 billion.

-- Liquidity needs also include a repayment of about IDR180 billion of the initial

outstanding principal amount on Gajah Tunggal's 2009 restructured bond due by July 21, 2013, and

IDR225 billion of accrued interest. The company repaid about US$11.5 million of the bond in July

2012.

-- We also factor in about IDR50 billion of shareholder distribution over the next 12

months.

Outlook

The positive outlook reflects our expectation that Gajah Tunggal's financial risk profile

will strengthen over the next 18 months. We expect the company's cash flows to improve and its

free operating cash flows to be positive over the period.

We could raise the rating by one notch if we believe Gajah Tunggal's ratio of total debt to

EBITDA will stabilize at 2.5x-3x, with the ratio of FFO to total debt exceeding 20% and positive

free operating cash flows. This could happen if the company's annual revenue grows more than 8%

in 2012 and 2013, while its EBITDA margin remains above 12%. We view our upgrade trigger of the

total-debt-to-EBITDA ratio of 2.5x-3.0x as appropriate, given the company's volatile margins. An

upgrade assumes that Gajah Tunggal will not be more aggressive in dividend distribution or

engage in related-party transactions with its 49.7% shareholder Denham Pte Ltd. that could

weaken its cash flows or leverage. It also hinges on our better understanding of the company's

growth plan and the associated financing.

A downgrade seems less likely given our expectation of Gajah Tunggal's operating

performance. However, we could revise the outlook to stable if: (1) intense price competition or

rapidly increasing raw material prices result in revenue growth of less than 1% and a decline in

EBITDA margin to below 10%, such that Gajah Tunggal's total-debt-to-EBITDA ratio exceeds 3.5x;

(2) the company's liquidity deteriorates quickly because of a rapid increase in working capital

requirements or less favorable terms of trade with clients; or (3) Gajah Tunggal's capital

spending in 2012 significantly exceeds our expectation, resulting in a ratio of total debt to

total debt plus equity of more than 50% for a prolonged period.

Related Criteria And Research

-- PT Gajah Tunggal Tbk. Outlook Revised To Positive On Expectation Of Stronger Financial

Profile; 'B' Rating Affirmed, May 8, 2012

Source: http://news.yahoo.com/text-p-summary-pt-gajah-tunggal-tbk-092954910--sector.html

West Nile virus symptoms snooki ll cool j amy schumer amy schumer Prince Harry Vegas pictures Avril Lavigne