The offer was priced at the bottom of the indicated range to raise a modest $32.3 million, which wasnÆt really enough to put investor interest to a real test. It was still a step up in terms of momentum, however, after two other Indonesian listing candidates in recent weeks cut the size of their offerings aggressively and scrapped their international tranches. One of them û shrimp farmer PT Central Proteinaprima - eventually postponed its IPO altogether.
One observer said investors liked TotalÆs offering because of the companyÆs solid profitability and high return on equity and the fact that it is in a good position to benefit indirectly from IndonesiaÆs planned infrastructure expansion. Given the usual potential concerns involving Indonesia, including liquidity risks and currency risks, it also helped that the stock was offered at a cheaper valuation than its key comparables.
The offer, which was arranged by CLSA, comprised 300 million new shares that were sold through the IPO and 550 million secondary shares that will be sold through a private placement when the stock starts trading on July 25.
According to a market source, all the 850 million shares, which equals 31% of the enlarged share capital, had been allocated after the offer was about 1.3 times covered. There is also a greenshoe of an additional 62 million secondary shares.
The price was fixed at Rp345 ($0.03) after the shares were offered to investors in a range between Rp345 and Rp420, which brought the total deal size to Rp293.3 billion. It will increase to Rp314.6 billion, or $34.7 million, if the greenshoe is exercised in full.
The final price values Total at nine times its projected 2006 earnings, which compares with an average 14 times for the key comparables, according to analysts. In fact, even at the top end of the range, the newcomer was valued at only 11 times forward earnings, making the offer look attractive.
About 40 investors, mostly Asia-based, participated in the deal, which will be split roughly 50-50 between international and domestic investors once the private placement has been completed and if the greenshoe is exercised, the source said.
The company has been profitable in 34 out of the 35 years since it was established, including throughout the Asian financial crisis. Last year it posted a net profit of about Rp62 billion on sales of Rp1.16 trillion, and this year the bottom line will jump another 69% to about Rp105 billion ($11.6 million), according to analyst projections.
It has a return on equity in excess of 20% even though its conservative way of doing business means it has no debt on its books. The company also has a national footprint and while it doesnÆt get involved in infrastructure projects directly it is expected to participate indirectly through the construction of buildings surrounding the new projects. The latter tends to have higher margins than pure infrastructure contracting.
About 60% of TotalÆs construction projects are commercial buildings, while 20% are residential and the remainder other types of large buildings such as hospitals and schools. About 75% of its customers are repeat customers that keep returning given the companyÆs track record of delivering on time and within budget, according to one source familiar with the company.
Last month, IndonesiaÆs PT Bank Bukopin was forced to change its plan for a combined international and domestic IPO after ABN Amro Rothschild dropped out as the international bookrunner amid what sources said was weak demand. Bahana Securities and Indo Premier Securities pushed on with a domestic IPO after cutting the size of the offering from 30% of the share capital to 15%, which allowed the company to raise $32.5 million.
Proteinaprima, which is an Indonesian unit of ThailandÆs Charoen Pokphand Group, looked to be heading in the same direction after its initial plans to raise $150 million from domestic and international investors was cut back to a domestic offering of up to $40 million. Macquarie Securities also resigned as bookrunner for the international tranche, leaving Danareksa Sekuritas as the sole arranger. However, in late June that offering was put on hold and banking sources say it has been postponed for the time being.