Pre-marketing is underway for a potential share sale in Indonesian insurer Sinar Mas Multiartha which is attracting some interest from international investors, sources say, although investor activities have been generally slow ahead of the Lunar New Year holidays. Sinar Mas Multiartha is the finance arm of Sinar Mas Group. Aside from insurance it is also active in banking, multi-finance, leasing and information technology among other things.
Although no offering has been formally announced, one source said the company has permission to issue up to 10% of its existing capital in the form of new shares, while its major shareholder has said that it is also considering a potential sale. Based on the current share price, a 10% sale would translate into about $300 million, but that would likely be the top end as most follow-ons tend to get done at a discount, one source said.
Sinar Mar Multiartha listed on the predecessor to the Indonesian Stock Exchange in 1995 and has a current market capitalisation of about $3.1 billion. However, trading volumes are thin and investors are supposedly only willing to look at the deal at a discount to the current trading price.
The bookrunners of the deal, Deutsche Bank and UBS, estimate Sinar Mas Multiartha’s fair market value at around $1.3 billion to $1.6 billion and about $2 billion, respectively. This suggests that a sale of 10% to 20% worth of shares (including existing shares by the major shareholder) will translate into about $200 million to $400 million, although the offering size has yet to been determined, another source said.
The main owner behind Sinar Mas is the Widjaja family. It owns a number of companies, but the main vehicle is JBC International Finance (MAU), which holds a 52.53% stake in the insurance company, according to Indonesian Stock Exchange data. Another 8.45% is owned by Sinarmas Sekuritas.
The Sinar Mas move comes after bankers started pre-marketing last week for a potential follow-on share sale by Indonesian contract mining and equipment rental company Petrosea. The pre-marketing was scheduled to end yesterday and the company is expected to launch an offering of about $100 million after the lunar new year holidays. Macquarie and UBS are joint bookrunners.
Sinar Mas’s share offering will be open to investors in Asia, Europe and the US, but at this early stage (pre-marketing to international investors started last Thursday), interest has come mostly from Asia, one of the sources said. The timetable has yet to be determined, but it is possible that it too will launch a roadshow after the lunar new year.
Sinar Mas ended 0.6% higher yesterday at Rp4,525. The share price jumped nearly 140% in 2011 when Indonesia was one of the best performing stock markets in Asia, helped by its strong domestic consumer base.
The company’s earnings have also shown signs of growth. For the year ended December 2010, Sinar Mas booked $141 million in net income, up from $68 million the year before, according to Bloomberg data.
But trading volume in the stock has been thin — on a few occasions last September, a mere 500 shares changed hands, which is only a fraction of the free-float of 2.5 billion shares, according to Bloomberg data.
