ABM Investama upsizes Indonesian IPO in full

The Indonesian coal mining and diversified energy company raises $230 million after selling 20% of its share capital and fixing the price above the bottom of the range.

ABM Investama has raised Rp2.06 billion ($230 million) from its initial public offering after fixing the price above the bottom of the range at Rp3,750 per share and exercising its upsize option in full. The deal shows that investors are still interested in putting money to work in Indonesia, and proves that signing up investors before launch helps to improve the confidence of potential buyers.

ABM Investama, an Indonesian diversified energy-related company with a growing presence in coal mining, structured the deal with a base offering that accounted for 15% of the share capital plus an upsize option making up another 5% of the company. At the full 20%, the offering comprised approximately 550.6 million shares, of which 75% were new. The deal also comes with a 9.9% overallotment option – all secondary shares – that could increase the deal size even further to $253 million.

The secondary shares are sold by the controlling shareholder, Tiara Marga Trakindo, which owned about 35% before the IPO.

According to a source, the base deal was covered at launch by a combination of domestic and international anchor investors, which meant the roadshow could be focused on drumming up incremental demand to increase the size. In the end, more than 50 accounts took part in the transaction and, including the upsize option, it was about two times covered. Perhaps not too surprisingly, given the volatile market environment and continued risk aversion among global investors, the majority of the buyers were domestic. However, there was decent interest from international institutions as well, particularly Asean-focused funds based in Singapore.

Resources-focused funds were not that interested, perhaps because the deal was quite small, perhaps because the company has only recently started mining operations. ABM Investama is also involved in contract mining, integrated logistics, power solutions and engineering services. As of last year, 45% of its revenues came from contract mining, but the plan is for coal mining to become the largest part of the business in the future.

However, some observers said while the company was viewed to be attractive as an Indonesia play, its valuations were seen to be less compelling when compared to the large number of Indonesian coal miners that are already listed.

The final price of Rp3,750 translates into 9.4 times next year’s earnings, based on the joint bookrunner consensus, which compares with about nine times for the wider Indonesian coal mining universe. That said, analysts argue that ABM Investama’s diversified business warrants a higher valuation.

The anchor investors were said to have been price insensitive and even though the investors who came in during the bookbuilding were more conscious about price, the deal could have priced at least at the mid-point, the source said. However, the company was quite keen to be able to exercise the entire upsize option in order to increase the free-float and to achieve that the bookrunners chose to fix the price a bit lower. The shares were offered in a range between Rp3,250 and Rp4,650.

The stock is due to start trading on December 6. Morgan Stanley is the sole global coordinator and a joint bookrunner together with Bank Mandiri and Macquarie.

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