The spin-off of AAI through a public offering (IPO) and shareholder rights issue (PUPS) allows $ADRO to streamline its core business, focusing more on other high-growth areas such as green energy or aluminum. This strategic move can unlock significant value for both ADRO and AAI, offering opportunities for ADRO shareholders to participate directly in AAI's potential growth.

Post spin-off, ADRO will retain a 90% stake in AAI, which keeps most of the upside while reducing its exposure to the thermal coal business—something that might align with investors seeking more environmentally-friendly portfolios.

The PUPS pricing range between $2.45 billion and $2.63 billion for AAI suggests a price-to-earnings (P/E) ratio of 2.95–3.17x, which is relatively low. This suggests that the market may have an undervalued view of AAI's thermal coal operations, creating a potentially attractive entry point for investors. Moreover, this low P/E could make AAI's IPO appealing to institutional investors, potentially boosting demand during the listing.

ADRO's shareholders will have rights to purchase shares of AAI at the PUPS price, which gives them access to direct ownership of AAI at potentially favorable terms. For every 100 shares of ADRO, shareholders are entitled to ~23 shares of AAI, effectively offering a cost-efficient way to maintain exposure to the thermal coal business.

With the company planning a special dividend, to be discussed in the November 2024 extraordinary general meeting (RUPSLB), this provides an additional incentive for current shareholders. Special dividends could serve as a catalyst to boost investor interest in the stock in the short term, adding a layer of income available to purchase AAI shares.

The spin-off of AAI presents multiple bullish catalysts for ADRO. While there will be a near-term reduction in net earnings, the long-term strategic benefits, the potential value unlock from AAI's IPO, and the opportunity for shareholders to maintain exposure to AAI make ADRO an attractive investment. Coupled with the special dividend proposal, the stock is well-positioned for a positive performance in both the short and long term. The company’s strong market position, supported by a reasonable valuation post-spin-off, provides further support for a bullish outlook.