Companies told to think it through before going international
JAKARTA (JP): International financial analysts foresee great interest among investors in New York in buying shares of high- quality companies from Indonesia.
The analysts from New York who spoke as panelists at a conference here yesterday observed that since Indonesia is part of the robustly-growing East Asian economy, investors are excited about taking part in that growth.
"There has been a strong surge in Asian share listings on the New York Stock Exchange (NYSE) and those shares provide high rates of return," said Matthew T. Freemont-Smith, an executive of the New York-based Goldman Sachs financial company.
They cautioned, however, that companies should first thoroughly consider the costs and benefits of listing their shares on such international exchanges as the NYSE.
"You should have a very strong reason for listing in New York," cautioned John Bober of Arthur Anderson accountancy and consulting firm.
Bober, Freemont-Smith and Boyd C. Lees of the Bank of New York briefed the hundreds of businessmen who filled the conference room to capacity on the tough requirements for share listings on NYSE and the responsibility the issuers should bear after listing.
The conference, organized by the Financial Club and Arthur Andersen/SGV-Indonesia, discussed the trends, options and challenges for Indonesian companies intending to go international.
The central theme of the meeting was extremely timely in view of the Indonesian government's plan to list the best state companies either on the New York or London stock markets.
The government has selected PT Indosat -- the international telecommunications monopoly -- to be the first state company to go international through sales of roughly 25 percent of its shares.
The panelists agreed that listing on NYSE provides many benefits because it is the most prestigious stock exchange in the world and offers the largest investor base.
"Listing in New York could become a showcase vehicle for the Indonesian economy," Freemont-Smith noted.
Advantage
He added, however, that viewed from investors' interests it would be an advantage for Indonesian companies intending to go international to first have their shares listed on the domestic stock market.
"Listing on the home country market will provide potential investors overseas with a benchmark evaluation and established local sources of information about the company," Freemont-Smith added.
Earlier, at the opening of the conference, Bacelius Ruru, Chairman of the Capital Market Supervisory Agency, again urged Indonesian companies to first list on the domestic stock exchanges if they intend to go public.
"A decision to go international should be made only after it is determined that an offering on the domestic market alone does not meet a company's full range of financing objectives."
Ruru therefore suggested that selling shares in New York preferably be made through the American Depository Receipts (ADR) instead of direct public offerings because the former method has direct links to the domestic stock market.
ADR serves as recipient of the shares of non-resident companies held in the vault of a U.S. bank and entitles the shareholders to all dividends and capital gains.
According to Ruru, listing through the ADR is less costly and less time-consuming than direct public offerings, but still provides similar advantages such as access to equity financing, liquidity and visibility.
He cautioned that direct public offerings on international stock markets subject share issuers to high levels of scrutiny by sophisticated members of the investing public, as well as stringent requirements for disclosures and financial reporting.
"Furthermore, listed companies in New York must maintain investor relations. Therefore, you should take a hard look early in the process before going international," Bober cautioned. (vin) IFC -- Page 8