January 14, 2025

Expanding Beauty and Wellness

Market Commentary

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Lately, we’ve been talking a lot about AADI as one of our top stock picks.

It turns out we’re not the only ones optimistic, Saratoga is also confident, maintaining a 15.2% stake in ADRO even after spinning off AADI.

Not only that, Saratoga participated fully in POES’s rights issue, which brought their ownership in AADI to around 13%, even though there was slight dilution due to new shares being issued during the IPO.

Saratoga’s strategy is clearly well planned. They see AADI’s development as perfectly aligned with their focus on green and renewable energy investments.

AADI is even expected to become a strong new cash flow source, eventually taking over ADRO’s primary role. If everything goes as planned, Saratoga’s NAV could rise significantly by the end of 2025.

But that’s not all, Saratoga is also strengthening its presence in other sectors, like the large scale expansion of Brawijaya Hospital.

Their focus is clear, building businesses closely aligned with consumer needs, especially in healthcare, as part of their future investments.

And here’s another interesting highlight: their investment in ZAP beauty clinics. In just the past two years, ZAP has opened over 30 new outlets!

Saratoga also has big plans to further expand its product portfolio to accelerate growth even more.

From our perspective, Saratoga has great potential to continue growing, especially with its strong balance sheet and the possibility of lower borrowing costs if interest rates are cut in 2025.

This would provide additional ammunition for them to strengthen their investments, particularly if attractive opportunities arise.

Saratoga also has an annual investment allocation of around USD 100 mn. This allows them to maintain a healthy gearing level while staying aggressive when significant investment opportunities emerge in 2025.

While Saratoga’s prospects look promising, there are some risks to consider.

A decline in commodity prices, such as nickel and coal, could significantly impact their portfolio’s income and valuation.

Additionally, if coal prices weaken, dividend income from AADI could also drop, given the sector’s substantial contribution.

All things considered, we remain optimistic and have upgraded our recommendation for Saratoga to BUY, with a target price of IDR 2,500.

This target is based on NAV valuation, which includes Saratoga’s ownership in AADI in the calculation.

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January 14, 2025

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