11 firms to float shares despite bearish market

By Aloysius Unditu

JAKARTA (JP): At least 11 companies will launch initial public offerings (IPO) within the next three months despite the bearish condition of the market.

They are PT Humpuss Intermoda Transportasi of the Humpuss Group, Surya Inti Permata, Impact Permata, Pakerin and Elnusa, a subsidiary of state-owned company PT Pertamina.

Other companies which will also launch IPOs soon include PT Ricky Putra Globalindo, Bank Global International, Ristia Bintang Mahkota, Makindo, Aneka Tambang and Astra Agro Lestari, which are set to make their capital debut later this year.

According to securities analysts, there has not been much choice for those companies but to sell shares to the public in order to get investment funds.

Loans, which carry interest rates of above 25 percent per annum, were very expensive for them. "So they don't have much choice but to sell their shares to the public, even though the market is nonconducive," an analyst said.

The analysts likened the bearish condition in the stock market to stormy waters.

Like sailors who struggle through stormy waters on rainy days, these companies have to sell their shares, even at a discount, to acquire much-needed investment.

The analysts said that raising funds from the public through the capital market seemed to be the best solution nowadays because finding bank loans in the tight liquidity market would be difficult.

"It's difficult to obtain bank loans. Banks are more cautious because of the growing number of loan defaults," Socgen Crosby's head of research Goei Siauw Hong told The Jakarta Post recently.

But selling shares to the public would also be difficult for companies right now due to the lack of public demand, he said.

"There has been no success story so far for companies which have gone ahead with their IPO in this bearish market," Goei said. He said the price of shares of several companies which had launched their IPOs in the last few months had fallen below their offered prices.

Two finance companies went public in September this year -- PT Bank Universal, a subsidiary of Astra International, and multifinance company PT Maharani Inti Finance.

The share price of Bank Universal, which floated its shares on the Jakarta Stock Exchange (JSX), had dropped by more than 50 percent to Rp 400 Monday from Rp 700. The IPO price of Maharani Inti Finance had also fallen by over 60 percent to Rp 275.

The analysts believed buying sentiment would remain low and doubted if there would be a strong demand for new IPOs in the next few months.

Stock prices on the JSX reached their highest level on July 8 when the main price index reached 740.08. But the market has since continued to decline due to the continued drop in the value of the rupiah and other regional currencies.

But Gunawan Yusuf, president of Makindo, was optimistic. He said some investors would find opportunities in the bearish conditions.

"The global and Indonesian stock markets are still bearish. Some foreign institutional investors will seek value stocks in the bearish market. It's the best time for them to buy," he said.

Makindo is one of 11 companies which have received the go- ahead from the Capital Market Supervisory Agency (Bapepam) to tap the local equity market.

Several other securities analysts said the fact that many investors still preferred to buy quality stocks in secondary markets rather than the primary market would become a problem for newcomers.

An analyst with Rashid Hussain Securities said recently that some quality stocks on the JSX, such as Daya Guna Samudera, Tambang Timah and Indosat, indicated good performances despite the fall of other shares.

He said these companies' stocks were better than others because most of their revenue was generated in U.S. dollars.

The share price of Tambang Timah rose to Rp 4,050 Monday from Rp 3,725 in late June and Indosat's share price increased to Rp 8,275 from Rp 7,175, while fish exporter Daya Guna Samudera's share dropped to Rp 4,175 compared to Rp 4,350.

"Companies which generate their revenue in dollars continue to make gains in the market," the analyst said.

Of the 11 companies to go public this year and next year, PT Astra Agro Lestari and Aneka Tambang generate their revenue in dollars.

PT Astra Agro Lestari plans to offer 125.8 million shares to the public late this year and PT Aneka Tambang started its public offering on Monday.

State-owned nickel and gold mining company PT Aneka Tambang will sell 430.76 million shares and expects to raise about Rp 603.07 billion from its IPO.

The president of ABN AMRO Hoare Govett Indonesia, which became the lead managing underwriter for PT Astra Agro Lestari, expressed optimism that the IPO of Astra International's subsidiary PT Astra Agro Lestari would be successful.

"Astra Agro Lestari's prospects are quite favorable as the price of crude palm oil (CPO) in the global market has continued to increase over the past few months," Agnes Safford said.

Edi Widjojo, a mining analyst from Mashil Jaya Securities, predicted that the IPO of PT Aneka Tambang would be successful because its stock price had continued to increase over the past few months.

"Investors are interested in Aneka Tambang because similar mining companies have performed well during this gloomy market," he said.

He said the share price of PT Inco continued to increase closing at Rp 6,200 Monday against a year-low of Rp 2,300 in late August and a year-high of Rp 8,800 in late July.

Tambang Timah, also listed in London, made strong gains, closing at Rp 4,050 yesterday against a year-low of Rp 3,000 in late July.

"I think this factor can boost investors' sentiment for Aneka Tambang," he said.