Books opened on Wednesday for the share sale of Indonesian telecom-tower operator Solusi Tunas Pratama, which is part-owned by US private equity firm Carlyle.
The secondary deal opened on April 29 following a 2.6% drop in the Jakarta Stock Exchange Composite Index, a drop partially spurred by the executions of eight foreigners convicted of drug offences in Indonesia.
Sources close to the deal say that despite the day's decline, demand has been strong for STP, the third largest tower leasing company in Indonesia. One fund manager told FinanceAsia that Singaporean sovereign wealth fund Temasek is believed to be one of the anchor investors.
If successful, the deal will be one of the largest transactions in Indonesia this year, second only to Indonesian hospital operator Mitra Keluarga Karyasehat’s $343 million March IPO, according to Dealogic data.
The 312.8 million-secondary share deal represents about 27.5% of total outstanding shares, and will be offered at an indicative price range between Rp10,500 to Rp12,500 per unit, according to a term sheet seen by FinanceAsia. The deal is being marketed on a syndicate consensus of 11.7 to 13.1 times 2015 Ev/Ebitda, and 10 to 11.2 times 2016 Ev/Ebitda.
The deal will allow Carlyle and STP’s operating parent Kharisma Indha Ekaprima to secure between $255 million to $303 million after selling a combined 27.5% stake in the tower operator.
Carlyle first invested in STP in October 2012. It paid roughly $100 million for a 25% stake in the tower leasing company, according to media reports. STP shares have risen over 100% from October 2012 to-date.
After the share sale, Carlyle will see its stake drop from 25% to 15%, a second source close to the deal told FinanceAsia.
Deutsche Bank and JP Morgan are the leads on the share sale. CIMB is the bookrunner and CLSA is the co-lead manager. Books will close on May 8, with pricing and allocation scheduled for May 11.
Some 31.3% of the company is available on free-float, which will rise to 58.8% post-share sale.
After the placement, STP’s market cap will be between $926 million to $1.1 billion. There is a six-month lockup for the selling shareholders.
Another source close to the deal said that despite the near-3% drop in the Jakarta Stock Exchange Composite Index on the first day of the bookbuild, interest in STP has been solid. The issuer has received inquiries from a handful of global sovereign wealth funds, long-only institutional investors, and hedge funds so far.
Weak markets could impact the pricing and push it towards the lower end of the range, he added. “Given where the market is, some people want to come in at the bottom end of the range,” the source told FinanceAsia. “At this stage, it’s too early to say [where shares will price]." He maintains some orders are coming in slightly higher however.
Lower-than-expected earnings in Indonesia coupled with booming Hong Kong and China markets have led to outflows in Southeast Asia and constrained deal flow.
“There’s a lot of liquidity flowing out of Asean into Hong Kong and China,” he acknowledged. Still, some of the investors are Indonesian specialists, and as such are keen to invest in the telecom tower operator at attractive valuations, he said.
Indonesia’s three largest telecoms tower companies — Profesional Telekomunikasi Indonesia, Tower Bersama Infrastructure and STP — are set to expand their scale and market share as the country’s telecommunications industry continues to consolidate.
STP is forecast to maintain its market position in Indonesia through acquisitions and a moderate build-up of new towers — between 300 and 400 towers a year — compared with Telekomunikasi and Tower Bersama, which have been adding more than 1,000 towers a year each, according to a Standard & Poor’s note dated February 4.
Comps
At 11.7 to 13.1 times 2015 Ev/Ebitda, STP is being offered at a discount to its closest peers, which include Tower Bursma and Sarana Menera Nusantara, according to a source close to the deal. Tower Bursma is trading at around 16.3 times Ev/Ebitda 2015, while Menera Nusantara is trading above 13 times Ev/Ebitda 2015.
The country’s Jakarta Stock Exchange Composite Index fell 2.6% on April 29 following news of the controversial executions of the drug offenders. "The executions are one of the reasons [markets fell on April 29]," the source said. "It definitely plays a role."
The market has been in decline for most of the year, however, having fallen 2.8% this week. It is down 2.5% year-to-date as investors shift focus from Southeast Asia to red-hot markets in Hong Kong and China.
Mainland investors continue to pile into Hong Kong stock markets following the news in March that Chinese mutual funds can purchase H-shares via the Shanghai-Hong Kong Stock Connect without a QDII license.
Since April 2, Hong Kong’s Hang Seng Index is up 12.4% up to April 29, and is up 20.3% year-to-date. The Shanghai Stock Exchange Composite Index meanwhile rose 17.0% in April and 38.4% so far this year.
The share-sale is the latest for the US private equity firm as it continues to cash out from some investments in the region. Carlyle offloaded its entire stake in Haier Electronics Group on April 15, exiting a near four-year-long investment in the Chinese home appliances company and raising $424.5 million in the process.
