Capital market dismal for new listings

Capital market dismal for new listings

By Aloysius Unditu

JAKARTA (JP): Nineteen ninety-seven has gone and 1998 has
arrived. But a different year does not necessarily mean a
positive change in the country's capital market.

Nineteen ninety-eight does not yet offer good prospects for
new listings, securities analysts predict.

"I think there will only be a few companies which will launch
their initial public offerings (IPO) this year," a senior analyst
at Bahana Securities told The Jakarta Post yesterday.

According to data provided by the Jakarta Stock Exchange
(JSX), the number of companies which listed their shares on the
JSX last year was 30, raising Rp 3.5 trillion (US$683 million) in
funds from the public.

The number of the new listings was much higher than the
initial target.

Analysts earlier predicted the number of IPOs would decline in
1997 due to unfavorable political climate during the general
election last May.

However, the prediction turned out to be wrong. The number of
the new listings in 1997 was the highest in the last three years.

In 1996, there were only 16 new listings, raising about Rp 2.4
trillion in fresh funds, while in 1995 the number of companies
which floated their shares on the JSX was 22, raising Rp 6
trillion in funds.

The analyst from Bahana said the shares of resource-based
companies would be more attractive than those offered by other
firms during the monetary crisis.

"But there are only a few companies in this category," he
said.

Property and banking sectors, believed to be the hardest hit
by the currency crisis, would still face difficulty in entering
the equity market.

"Even if property and banking companies force themselves to
proceed with their IPO plans, there will be no securities
companies that have the courage to underwrite their public
offerings," the analyst said.

Head of research at Socgen Crosby Securities Indonesia Goei
Siauw Hong shared the analyst's view.

Hong said even if some companies proceeded with their IPO
plans, they would fail because many investors would stay away
from the market.

Stock analysts said stock prices on the JSX, which had seen
strong performance in the first half of 1997 with the JSX
composite index breaking its highest record of 740.83 on July 7,
were expected to continue declining, at least up until the second
half this year.

Some stock analysts with a more pessimistic view expected the
downward trend to continue until the end of the first three
quarters this year.

Most foreign investors, which controlled more than 65 percent
of transactions on the JSX before the monetary crisis hit the
country last July, were unlikely to return to the market if
uncertainty in the economy remained, they said.

"We expect the market to decline further in the first nine
months this year due to high-profile bankruptcies and earnings
disappointments by most companies," Hong told The Post yesterday.

The monetary crisis, which has seen the rupiah lose 65 percent
of its value since July last year, has not shown any signs of
recovery.

Some analysts said instability in the currency exchange rates
would push foreigners away from the market due to uncertainty of
a return on their investment in U.S. dollars.

They said the instability of the rupiah would also put
pressure on interest rates, which would be harmful to the market.

Faced with such bearish sentiment, most stock analysts
predicted there would be a decline in IPOs this year.

According to data compiled by The Post, some companies which
will go ahead with their IPOs this year include PT Danayasa
Arthatama, PT Elnusa, PT Krakatau Steel, PT Sempati Air, PT Timor
Distributor, PT Bintuni Minaraya, PT Pelabuhan Indonesia, PT Bank
Baja, PT Impact Pratama and PT Margamasa Griya Realty.

PT Danayasa Arthatama is expected to raise about $225 million
from its IPO this year. PT Elnusa, a subsidiary of state-owned
oil company PT Pertamina, is expected to offer about 200 million
shares to the public and raise Rp 300 billion.

PT Elnusa, a joint venture between Pertamina and PT Tridaya
Esta, a minority shareholder in the company currently owned by
businessmen Bambang Trihatmodjo, the second son of President
Soeharto, and Indra Bambang Utoyo, is a subsidiary of Pertamina
dealing with telecommunications-related services.

The company has five main business divisions: oil and gas
exploration and production, information and telecommunications,
oil refinery, retail oil production, and infrastructure
development.

PT Krakatau Steel, another strategic state enterprise, is
expected to offer between 30 percent to 40 percent of its total
enlarged capital to the public to raise about $600 million.

PT Sempati Air is expected to raise Rp 200 billion by offering
15 percent to 20 percent of its total enlarged capital.

PT Bintuni Minaraya is to raise about Rp 400 billion, PT
Pelabuhan Indonesia is to raise Rp 2 trillion, Bank Baja is to
raise Rp 62.5 billion and Impact Pratama is to raise Rp 80
billion.

Some analysts said only companies with strong fundamentals and
revenue generated in dollars had managed to sail clear of the
stormy waters last year.

State-owned gold and nickel producer PT Aneka Tambang and
plantation firm PT Astra Agro Lestari of the Astra International
Group were among companies which were successful in their public
offerings last year.

"If that is an indication of success, other companies which
are not included in this category will face failure," an analyst
said.