Banpu sells $400 million of shares in Indonesian coal mining unit

The upsized block in ITMG comes as two other Indonesian companies launch sizeable IPOs.

Indonesia continues to grab the headlines with several equity deals hitting the market over the past couple of days. On Wednesday evening, Thailand’s biggest coal miner Banpu raised about $400 million from a sale of an 8.7% stake in its Indonesian subsidiary, PT Indo Tambangraya Megah (ITMG), which marked Indonesia’s second largest block trade in 10 years.

Earlier that same day, Indofood CBP had set the price range for its initial public offering and kicked off the domestic roadshow, and yesterday Harum Energy, another coal miner launched yet another IPO.

Both IPOs are sizeable, with Indofood CBP looking to raise between $554 million and $709 million and Harum Energy targeting between $277 million and $350 million. These deals come after Berau Coal Energy raised $152 million from an IPO last month that was priced at the top end of the indicated range and upsized following stronger-than-expected demand from international investors.

And the outcome of the ITMG block suggests that there is still good demand for Indonesian paper. However, while the Indonesian stock market remains one of the best performing markets in the region on the back of strong economic growth, the growing supply of equity issues is starting to have an impact. The Indonesian pipeline alone includes at least a couple of government part-privatisations and on top of that the listing candidates lining up in the rest of the region are indicating that the coming four months will be one of the busiest periods for new issuance in Asia ever.

In terms of the ITMG deal, this was evident primarily in terms of the discount demanded by investors and the deal was priced at the bottom of the price range for a maximum 8% discount versus the day’s close of Rp39,300. Although the need for a wide discount was also prompted by the fact that the stock is quite illiquid -- the deal accounted for 33% of the free-float and a massive 130 days worth of trading volumes.

Prior to the deal, the stock was also trading near the 52-week high of Rp40,450, which it reached on August 23, and according to a source, even with the discount, the deal was priced at a premium to the average valuation for the Indonesian coal mining sector.

However, at the same time the original deal size of $300 million was upsized to $400 million after the deal was well covered. More than 80 investors were said to have submitted orders and about two-thirds of the deal were bought by international accounts. Given how illiquid the stock is, hedge funds were largely absent.

The deal was launched at an indicated size in US dollars, rather than with a specific number of shares. However, a source said Banpu sold approximately 98.5 million shares, which implies total proceeds of Rp3.56 billion ($392 million).

Goldman Sachs ran the international bookbuilding, while the local portion of the deal was handled by Bahana Securities, Mandiri Sekuritas and Danareksa Securities.

As a result of the sell-down, Banpu’s stake in ITMG will fall to about 65%. Its remaining shares will be locked up for 90 days.

¬ Haymarket Media Limited. All rights reserved.
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