PT Bank Rakyat Indonesia (BRI) completed the largest equity deal from Indonesia since the financial crisis yesterday (Wednesday) with the completion of a roughly Rp4.17 trillion ($486 million) IPO. With Bahana Sekuritas and UBS as lead mangers, the microfinance lender priced a 4.764 billion share deal at Rp875 per share, the top end of a Rp700 to Rp875 indicative range.
The transaction has a split, which will see 54% of the deal placed with international investors and 46% with domestic investors. The local retail offering opens next week and will see10% of shares set aside for company employees and 5% for bank customers, each receiving a 3% discount. The base deal comprises 3.811 billion shares, plus a 382 million share redshoe and 572 million share greenshoe.
In a pattern becoming increasingly familiar with recent IPO's, the international tranche was significantly oversubscribed as investors inflated orders in the hope of securing paper. The book is said to have closed 20 times covered, with several orders above the $100 million mark. Like Malaysian satellite company Astro, which secured a similarly impressive roll call, the $5 billion book of demand represented a large number of trading days on the Jakarta exchange (66) and even larger percentage of market capitalization (10%).
By geography, there was a split, which saw 48% placed into Asia, 27% into Europe and 25% into the US. A total of 180 accounts participated and observers report a lot of new money continuing to flow into the market rather than switches out of other Indonesian banking stocks.
On a 2003 price to book basis, BRI has priced at 1.41 times. This is a significantly higher multiple than Bank Mandiri achieved from its IPO in late June and reflects a strong secondary market performance by the sector in the interim period.
On a like-for-like basis, however, BRI has achieved the same pricing as Mandiri, with both coming at a 20% discount to the prevailing trading level of Bank Central Asia (BCA). The latter is currently trading at 1.7 times price to 2003 book, while Mandiri has slipped back to below one times book after re-valuing its asset base over the summer.
On a P/E basis, the deal has priced at roughly six times forecast 2003 earnings.
The Indonesian government is likely to take a lot of comfort from the success of the IPO, which did not seem to be affected by news of a fraud investigation at PT Bank Negara Indonesia (BNI). Observers believe it underlines the continued market momentum.
On listing, BRI will now have a freefloat of 40.05%. The transaction combined both primary and secondary shares, with the government divesting 30% (without taking the new shares into consideration) and the company 15% of the enlarged share capital.
Alongside the leads, co-leads were CLSA, DBS and Fox Pitt Kelton. Lawyers acting on the deal were Shearman & Sterling representing UBS and Bahana as underwriters' counsel; with Hadiputranto Hadinoto & Partners as local underwriters' counsel. Other counsel was Milbank Tweed Hadley and McCloy, Makes & Partners.