The deal attracted a lot of interest on the basis that this is the first business owned by the Sampoerna family to be listed since it sold its entire stake in clove cigarette manufacturer PT HM Sampoerna to Philip Morris two years ago. It is also the first Indonesian IPO to be marketed to international investors this year following only three deals last year.
According to sources, international investors are expected to end up with about 80% of the institutional tranche, which in turn accounts for about 90% of the total offering. The institutional tranche was completed on Thursday after attracting about $1.1 billion worth of demand. It will be followed by an offering to retail investors and company employees on June 11 to 13 at the same price.
The offer price was fixed at Rp2,340 per share, which compares with an indicated range of Rp1,900 to Rp2,400. Including the retail and employees offers, which will each account for 5% of total deal size, Sampoerna Agro is selling 461.35 million new shares, or about 24.4% of its enlarged share capital.
This will give it a market capitalisation of about $492 million at the time of listing. The IPO was jointly arranged by Credit Suisse and Danareksa Sekuritas.
The IPO price values the company at an enterprise value to Ebitda ratio of about 8.9 times, which puts it at a slight discount to five-times larger rival Astra Agro at 10.5 times and on par with London Sumatra at 8.5 to 9 times. The Malaysian CPO producers, which historically have fetched a premium to the Indonesian players, trade at a median EV/Ebitda multiple of 13.
On a 2007 price-to-earnings basis, however, Sampoerna Agro looks a bit more pricey at 18 times (or 16.3 times adjusted for a one-off severance payment in the first quarter), compared with 16.8 times for Astra Agro and an average 15.5 times for the Indonesian palm oil producers. The Malaysian comps are currently trading at an average 2007 P/E of 20 times.
According to sources, the institutional orderbook was about 11 times covered. The demand came primarily from Asia, with UK investors contributing about 10%. The deal wasnÆt open to onshore US investors. About two thirds of the book was said to have been made up of long-only funds, but with significant interest from private banking clients and also some hedge fund demand.
Aside from the Sampoerna name and the rarity of an Indonesian IPO that is marketed internationally, a general investor interest in CPO producers as the selling price remains strong also likely played a role in attracting investors to the deal. The price of CPO traded in Malaysia has risen 32% so far this year to close to M$2,700 per tonne ($795). This compares with analystsÆ forecasts that the price will average Rp2,200 during the course of this year.
Indonesian CPO producers have traditionally lagged their Malaysian counterparts in terms of valuation, partly because of a concern that the Indonesian government would increase the export tax on palm oil and related products to ensure that the demand from domestic companies is met first.
That risk is now believed to be abating, which allowed Indonesia to surpass Malaysia in January terms of annual production of palm oil to become the largest producer in the world. Indonesia and Malaysia collectively accounted for 86% of the worldÆs production of CPO in 2006.
Aside from its plantations in Sumatra and Kalimantan, Sampoerna Agro also operates five CPO processing mills with a capacity of 350 tonnes of fresh fruit bunches per hour and is one of only seven government-approved producers of oil seed, some of which it sells to third party producers. The company produces both palm oil and palm kernel and has seen its production expand at a compound annual growth rate of 14.5% between 2003 and 2006.
ôWe expect that the yields from our plantations in the Sumatra and Kalimantan regions will improve and production of crude palm oil and palm kernel will increase as more of our trees mature and reach peak production,ö the company say in the listing document.
There is also a consolidation theme to the sectors which is favouring smaller players like Sampoerna Agro after IndoAgri has made a bid for London Sumatra. IndoAgri is a unit of Indonesian noodle maker Indofood Sukes Makmur and has been trades on the Singapore stock exchange following a backdoor listing earlier this year.
The money raised from the IPO will be used primarily to repay a loan from Credit Suisse which currently stands at $100 million, while the remainder will go towards the financing of the companyÆs expansion program. Among other things, it plans to increase is oil palm plantation area by 75,000 hectares over the next five years from close to 102,000 ha today, including plantations operated under the governmentÆs plasma or inti partnership programs.
Sampoerna AgroÆs IPO comes just ahead of the planned listing of TV network operator and programme producer, Media Nusantara Citra. That company, which is being brought to market by Bhakti Securities, Danareksa, Deutsche Bank, Lehman Brothers and UBS, is seeking to raise up to $340 million. If successfully priced at the top of the offering range, this deal would become the second largest Indonesian offering ever behind Bank Rakyat IndonesiaÆs $484 million IPO in October 2003 and just ahead of Bank MandiriÆs $326 million offering in that same year, according to Dealogic.
Sampoerna Agro is scheduled to start trading in Jakarta on June 18.