Djajanti's major timber firm assessed for IPO
Djajanti's major timber firm assessed for IPO
JAKARTA (JP): Independent surveyors have concluded that wood
inputs for PT Artika Optima Inti (AOI), a major plywood maker on
Seram island of Maluku province, will continue to depend largely
on the virgin forests in its concessions for the next 10-15
years.
"But after that period the company will have to get its raw
material from its logged-over concessions," said Agus Setyaso of
PT Wahanabhakti Persadajaya in a hearing on Tuesday.
The hearing, which was also attended by senior officials from
the forestry and industry ministries, the Capital Market
Supervisory Agency (Bapepam) and the Investment Coordinating
Board, was held to announce the findings from the assessment of
AOI's forest concessions.
The surveyors added, however, that the potential log harvest
from the logged-over concessions would depend on the quality of
maintenance work continually done on the remaining standing
trees.
Wahanabakti and Societe Generale de Surveillance (SGS) of
Switzerland have been appointed by the forestry ministry to
assess the input supply capacity of timber companies which intend
to float their shares on the Jakarta Stock Exchange.
The surveyor's findings, therefore, will provide references
for Bapepam to determine the supply risk factor of forest-based
companies.
AOI, a subsidiary of the Djajanti Group, originally planned to
float 66 million shares or 30 percent of its total common stocks
last May, but the planned initial public offering (IPO) has been
postponed due its failure to obtain a letter of recommendation
from the forestry ministry.
But last November, the ministry changed its ruling by
requiring timber companies intending to go public to have their
forest concessions assessed by independent surveyors and AOI was
the first company assessed under the new ruling.
AOI, undeterred by the IPO postponement, subsequently sold 30
percent of its equity shares to Malaysia Mining Corporation at a
price of $147 million in October.
Agus said the assessment made by Wahanabhakti and SGS was
based on the data and reports submitted by AOI. Hence, it was
practically a kind of desk study that has not been verified by a
site inspection.
He said the quality of AOI's logged-over forest concessions
could roughly be assessed from the amount of investment made in
their maintenance.
The surveyors found that AOI's annual investments in its
logged-over concessions ranged from $2.40 to $10 per cubic meter
of logs harvested.
He said with such a level of investment in maintenance work,
the future logging-cycle might have a smaller output than the
current one.
The surveyors said that the assessment took into account all
of the forest concessions controlled by the Djajanti Group,
estimated at three million hectares, as well as logs bought from
third parties.
The forest concessions owned by AOI itself total about 835,000
hectares.
Ade Erlangga, AOI's forestry director, told The Jakarta Post
yesterday that he disagreed with the surveyor's conclusion that
his company had operated at only 64 percent of total capacity.
"How can they say that? Last year we produced 320,000 cubic
meters of plywood which meant we produced at full capacity," he
said.
Erlangga also played down the surveyors' concerns over the
company's future supply capacity.
"The logged-over areas must be properly studied on the field
before making any conclusions," he said.
Meanwhile, AOI's president Effendi Sastrawijaya argued that,
according to Bapepam regulations, a timber company planning to go
public must guarantee an adequate supply of raw materials for a
five-year period only.
No Bapepam officials were available for confirmation
yesterday.
I Putu Gede Ary Suta, head of the Bapepam department of
corporate financial assessment who attended Tuesday's hearing,
said that AOI's IPO plan was still in the process of evaluation.
Putu said the assessment by independent surveyors is only one
of the requirements which have to be fulfilled by forest-based
companies intending to go public.
Director General of Forest Management Hendarsun Surya insisted
at the hearing that AOI should mention all its past offenses
(violations of forest management regulations) in the prospectus
for its IPO.
"This is important so that investors will get a full picture
of the risk factors," he said.
Peregrine
Agusman Deswandhy, the managing director of PT Peregrine Sewu
Securities -- the managing underwriter of Artika's share offering
-- hailed the assessment by SGS-Wahanabhakti.
"I think this assessment system is much better than the
previous procedure which required a letter of recommendation from
the Forestry Ministry," Deswandhy told the Post.
The present system, he added, makes the assessment process
widely transparent and forces forest-based companies to make full
disclosures of all salient aspects of their operations, including
the risk factors.
"The full disclosures obviously will greatly help the
investing public to make sound investment decisions," Deswandhy
added.
He underlined that the SGS-Wahanabhakti assessment covered
only the risk factor related to the supply of wood inputs to
Artika's wood processing industry.
Deswandhy, however, stressed the need for a uniform perception
and definition of the source of wood inputs.
"Our understanding is that the source of raw wood for a
plywood company should not be limited to its own forest
concession," he said.
In fact, Deswandhy added, the inputs for plywood should often
be obtained from several concessions or from concessions on
different islands to get the best mix of wood species.
He also wondered whether other plywood companies which have no
intention of going public would also be subject to independent
assessment by SGS-Wahanabhakti and to the same disclosure
requirements.
"And how about the other forest-based companies (PT Barito
Pacific and PT Sumalindo) which have now been publicly listed.
Will their forest concessions also be assessed?," Deswandhy
asked.
He argued that since all plywood companies, no matter whether
they are publicly listed or not, face the same risk factor
regarding the supply of inputs, they should presumably undergo
the same assessment.(vin/hdj)