BlueBird began pre-marketing ahead of its planned initial public offering that could net the Indonesian taxi-operator $300 million.
The third-generation family-run cab company, founded by the late Mutiara Djokosoetono in 1972 with 25 cars, hopes to take advantage of rising stock markets after July’s presidential election, and float its shares in Jakarta. If successful, the company would be the country’s largest IPO since state airline Garuda Indonesia secured $524 million in January 2011.
BlueBird, which now boasts a fleet of 30,000 vehicles and operates in 17 cities in Indonesia, will use IPO proceeds towards boosting its fleet further and potentially expanding in Southeast Asia.
A portion of the offering will be secondary, although the primary/secondary split has not yet been decided, according to a source close to the deal. The shares on offer will represent between 20-25% of its enlarged share capital.
The issuer has reportedly secured decent anchor demand in the first day of pre-marketing under the leads of UBS, Credit Suisse and local broker Danareksa.
The syndicate p/e 2015 forecast is between 18.4 to 24.3 times, which puts BlueBird’s market cap between $1.7 and $2.2 billion, the source told FinanceAsia.
Formal roadshows will start September 29, with the deal scheduled to price the week of October 6.
Where are the comps trading?
In the transportation sector, Express Transindo Utam is the company’s closest comp. It is currently trading at 20.53 times its 2014 earnings, with the company down 1% so far this year. Still, if BlueBird’s sole listed competitor is anything to go by, potential investors will be keen — Express Transindo is up 142% since its November 2012 listing.
Other transportation peers include Indonesina highway operator Jasa Marga Persero and Singaporean bus, taxi and car rental company ComfortDelGrow.
Jasa Marga Persero is trading at 27.18 times its 2014 earnings and is up 38% so far this year, while Singapore-listed ComfortDelGrow is trading at 18.64 times its 2014 earnings and has returned 21% year-to-date.
BlueBird currently accounts for 33% of market share in Indonesia, which may leave some questions about how much room for growth there is. Still, the demographics are clearly favourable, and the taxi-operator aims to tap into the country’s rising affluence, which could boost profits for years to come.
There are 74 million Indonesians classified as middle class, a number that will double by 2020 to roughly 141 million people, according to the Boston Consulting Group. And each year for the next six years, some 8 to 9 million people will accumulate enough wealth to reach middle class status.
Ultimately, there’s more to BlueBird’s story than rising affluence. The country’s infrastructure — or lack thereof — means taxi operators should continue to thrive, at least until the government provides dependable trains, buses and monorail systems.
Bus services and trains are limited, overcrowded and unreliable. Government officials have pledged to invest billions in the country’s infrastructure, including roads, buses, railroads and airports, but completing the projects will take years. During this time, taxis will remain the best form of transport.
The taxi-operator initially sought to float its shares by year-end 2013, but a pending family lawsuit kept BlueBird in cold storage. This capped off a difficult year for Indonesia’s stock market, which was pummelled as investors yanked billions out of emerging markets amid fears the US Federal Reserve would soon halt its bond purchase programme.
The issuer and its syndicate were quiet for the first half of the year, noting that it was difficult to pinpoint an ideal opportunity to bring the company to market with the pending presidential election.
Timing seems to be on BlueBird’s side so far. The company settled the family lawsuit in July, and at the end of the month, Joko “Jokowi” Widodo won the election with a margin of victory of 53.15% to 46.85%, offering the Jokowi-Kalla ticket a clear mandate to push ahead with its reforms.
Markets have reacted favourably post-election, with the Jakarta Stock Exchange rising 19% since Widodo’s victory. He will take office on October 20.
Still, questions remain, and it’s unclear how Widodo’s win will impact foreign investment in the country, which ultimately could have a trickle down affect to domestic companies such as BlueBird.
Indonesia earlier this year introduced taxes on more than 60 exports, including bauxite, copper concentrate and nickel ore, hoping that miners will be forced to build smelters in Indonesia and process unrefined minerals at home rather than ship it overseas. The aim is to create jobs and keep profits in the country.
Miners protested, claiming the cost of building smelters are too high, the taxes themselves are too high and would involve illegally reneging on their contracts.
This could dampen foreign investment in the country. Based on the FDI confidence index by AT Kearney, Indonesia ranked 9th globally in 2012 but has plummeted to 25th this year. The index ranks countries based on how changes in their political, economic and regulatory systems will likely affect FDI inflows in coming years.