What is the valuation of Holcim Indonesia?

Rumors of LafargeHolcim Ltd.'s divestment of its shares in PT Holcim Indonesia Tbk have triggered a price increase in the cement company's stock, traded under the code SMCB. On Friday (October 26th), Holcim Indonesia's share price closed at Rp 1,870 per share, representing a 123.95% increase from Rp 835 at the end of 2017.

Several cement companies, both domestic and foreign, are reportedly interested in acquiring the shares of LafargeHolcim's subsidiary, Holderfin B.V., The Netherlands, which owns 80.64% of SMCB. PT Semen Indonesia Tbk is even rumored to have made an offer ranging from Rp 25.5 trillion to Rp 28 trillion. This value exceeds SMCB's current currency enterprise adj value of Rp 22.95 trillion, according to Bloomberg data.

At a price of Rp 1,870 per share, the cement company's Price to Book Value (PBV) ratio reaches 2.16 times. This is higher than the PBV of Semen Indonesia (SMGR) shares, which stands at only 1.82 times. This means that the current valuation of Holcim Indonesia shares is more expensive than Semen Indonesia shares. Especially considering Holcim Indonesia has been experiencing losses since 2016. Therefore, investors should exercise caution before investing in SMCB shares to avoid being trapped at a high price.