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Investing.com - JPMorgan has downgraded Barito Pacific Tbk PT (BRPT:IJ) from Neutral to Underweight with a price target of IDR870.00, citing concerns that recent market optimism may be overextended.
The investment bank notes that Barito Pacific’s stock has gained approximately $8 billion in market capitalization over the past three months, suggesting the market is discounting more than 40% return on invested capital (ROIC) on a 20-year timeframe for potential investments.
JPMorgan estimates that Barito Pacific has roughly $1.1 billion of additional debt capacity based on its 1x net gearing debt covenant, which would allow for a maximum capital expenditure of $1.7 billion assuming a 70/30% debt/equity capital structure.
The downgrade follows a period of corporate activity within the Barito Pacific Group, particularly evident in recent acquisitions by TPIA, which JPMorgan believes may have led investors to develop similar expectations for Barito Pacific as a holding company.
JPMorgan characterizes the market’s current return expectations as "overly optimistic," contributing to its decision to downgrade the stock to Underweight status.
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