Saturday, April 27, 2013

Indonesian IPO hopefuls are finding investors reluctant to pay the high prices they are demanding, taking some of the heat out of one of South-East Asia's most active equity markets.

This caution means some issuers are facing delays, while others have scaled back their offerings.

"Valuations remain an issue and some foreign investors are not looking at Indonesia in the same league as Thailand or the Philippines," a banker said.

Planter Austindo Nusantara Jaya priced its IPO last Wednesday, but only after the size was vastly reduced to US$41m from the earlier planned US$150m.

"The company is not desperate for cash to sell at the price the investors wanted," a source said.

Austindo sold 330m shares at the bottom of the Rp1,200-Rp1,800 price range. The final price represents a forward price-to-earnings ratio of 10x, compared with the industry average of 12x. The enlargement option of 589m shares was not exercised.

Listing is targeted for May 8.

Morgan Stanley was the sole global co-ordinator, while Bahana Securities was the domestic underwriter.

In addition, there are understood to have been some delays in obtaining regulatory approval, due to the sudden pile-up of deals.

Fellow planter Dharma Satya Nusantara, which started premarketing its IPO of up to US$300m at the same time as Austindo in early April, has yet to launch the deal. A source said the IPO was "delayed for a few days and not many weeks". Early indications were that the IPO would be launched in late April.

Morgan Stanley is the sole global co-ordinator for Dharma Satya and underwriter with BCA Securities, Credit Suisse and Ciptadana Securities.

Bankers said the outlook for the plantation sector remained cautious, which explained the subdued responses to the Dharma Satya and Austindo IPOs. On the other hand, IPOs which offer exposure to Indonesia's growing consumer market are expected to do well.

The upbeat outlook for the country's consumer sector helped fuel the success of the Rp12.7trn (US$1.3bn) follow-on offering of Matahari Department Store in March, and has also led to institutional investors asking for more Indonesian paper.

However, the plantation companies suggest much of that demand is conditional, with investors reluctant to pay sky-high prices.

In the more popular consumer sector, MPM Motor is on track to launch a US$150m-$178m IPO that could be the country's largest so far this year.

The company plans to issue up to 1.015bn shares at the Rp1,500-Rp2,000 price range.

The final number of shares to be sold will be based on the price the company is able to get for the offer. The price range translates into a 2013 PER of 12.9x-16.6x.

Bookbuilding will start on Monday and pricing is expected on May 7. MPM is the distributor of Honda motorcycles in Indonesia.

Saratoga Investama Sedaya is expected to begin investor education for an IPO of around US$250m shortly after MPM Motor prices its float.

Saratoga is an investment holding company for several listed and unlisted companies, including Tower Bersama and Provident Agro, making it something like a South-East Asian version of KKR or Carlyle, and raising the prospect that it could bring its unlisted companies to market later. It also owns a 45% stake in MPM Motor.

Deutsche Bank and Morgan Stanley are joint bookrunners for the MPM offering, with DBS and Indo Premier Securities as domestic underwriters. Deutsche Bank and UBS are joint bookrunners for the Saratoga IPO.

By S Anuradha