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Multinational Finance Study Case - CEMEX Semen Gresik - PPT 2013
Multinational Finance Study Case - CEMEX Semen Gresik - PPT 2013
PT Semen Gresik
Presented by Group IV
Francisca Arini
Muhammad Prasetio
Tony Ferdyantara
Background
Cementos Mexicanos (CEMEX) from Mexico considers international
expansion in AsiaCase
Asia Markets expansion in order to turn Cemex into a global player
The first Asia market entry was in 1997 Philippines (30% stake in
Rizal Cement)
New target: Indonesian market The timing was inline with the
Indonesian privatization
Indonesian economy was open to outside investors and market
forces as part of promises to IMF (in exchange of economic &
financial assistance)
CEMEX appointed Goldman Sachs to find suitable cement
company in Indonesia
company profile
Founded in 1906
Largest cement manufacturer in the
Americas
3rd largest in the world (behind
Holderbank & Lafarge)
Based in Monterey, Mexico
Operated in 22 countries
High operating margins
Surviving Mexico economic crisis
corporate strategy
Net Sales
1994
1995
1996
1997
25,759
27,687
33,924
35,540
38,464
Operating Income
6,269
7,431
8,100
8,482
9,088
Majority Net
Income
4,637
4,951
10,045
10,319
7,725
4.39
4.60
7.81
7.95
6.01
Operating Margin
(%)
24.4
26.8
23.9
23.8
23.6
8,120
9,471
10,786
11,483
12,116
31.6
34.2
31.8
32.3
31.5
EBITDA
EBITDA margin (%)
Semen Gresik
company profile
Began producing in 1957
Exploiting large and accessible limestone
deposit in East Java
First government cement producer in Indonesia
to go public, issuing 35% of its share in July
1991
Become the largest Indonesian cement
producer in 1995, purchased Semen Padang &
Semen Tonasa for a total of US$ 476 million
Three companies still operated separately and
maintain independent administrative structure
Key Issues
Evaluation of Investment opportunities aboard to exploit
existing competitive advantage.
Application of valuation techniques as the basic of
International acquisitions decision.
Align an international expansion strategy with local
conditions in targeted region (e.g privatization of
emerging Asian economies).
Concern on the complexity of cross border business
expansion.
an overview
across
Asia,
asMargin
of June
1998
Cash
Cost
Gross
Margin
Ex Factory
Price
(US$/ tonne)
(US$/ tonne)
(US$/ tonne)
(US$/ tonne)
Pakistan
55
29
26
47%
Malaysia
40
26
14
35%
India
46
27
19
41%
Philipine
39
23
16
41%
Korea
39
28
11
28%
Taiwan
54
30
24
44%
Thailand
38
20
18
47%
Indonesia
16
10
38%
Average
41
24
17
40%
Valuation
Industry specific valuation
1.Compare market value with some value derived of the
companys financial statements.
2.Compare to precedent transaction ratios or comparable
firm ratios
Discounted Cash Flow (DCF) Method :
Free cash flows discounted with weighted average cost of
capital(WACC) to obtain the Equity Value.
Valuation
Market Cap
(US$
million)
EV/
Capacity
EV/ EBITDA
Price/ FCF
Price/Earnin
gs
Indocement
957.9
39
12.6
5.8
(27.9)
Semen
Gresik
461.9
53
8.5
11.4
56
49.5
65
5.5
0.5
(1.1)
INDONESIA
avrg
52
8.9
9.2
9.0
THAILAND
averg
146
10.7
4.3
(2.2)
MALAYSIA
avrg
55
11.5
8.4
(26.9)
PHILIPINES
58
4.1
4.2
5.5
Semen
Cibinong
Valuation
Discounted Cash
Flow Valuation
Valuation
Valuatio
n
Discounted Cash
Flow Valuation
Depressing Endings
Political side
- Regional autonomy law was applied
Depressing Endings
In December 2003, Cemex desire to revoke the 1998s
agreement and request assistance from International
Center of Settlement of Investment Disputes (ICSID) to
act as an arbiter. They are also demand to be awarded
substantial damages.
On Juli 27, 2006 Cemex sold all of their shares to Blue
Valley Holdings Pte Ltd.
Recommendations
Three main points to be consider in international acquisition
decision
1.Target identification and evaluation
2.Project execution
3.Post merger integration
Apply multiples and Discounted Cash Flow to value the target
FCF should be generated from the most reliable discount factor
to measure the risk.
Cross border expansion will most probably bring up the political
disruptions or intervention, restrictions and regulations.
Qualitative and quantitative risks should be consider carefully
End of Presentation
Thanks for your attention