The shares will be priced between Rp2,300 and Rp2,950 apiece and the company is selling 18% of its enlarged share capital. Of the 937.3 million shares on offer through the base deal, about 70% will go to international investors, while the remaining 30% will be set aside for domestic accounts. Close to 89% of the deal is made up of new shares. A greenshoe of 104.1 million shares, or 11% of the base deal, could take total proceeds to as much as $332 million.
The pricing is scheduled for May 23 and the actual trading debut for June 18. Citi and Deutsche Bank are joint global coordinators for the deal and bookrunners for the international portion, while Danareksa Sekuritas, Indopremier Securities and Mandiri Sekuritas will arrange the domestic sale.
The offering comes as other Indonesian coal miners are gaining on the back of expectations that strong demand for coal to fuel power plants will continue to underpin selling prices and earnings. Bumi Resources has risen 27% since the start of pre-marketing for IndikaÆs offering on April 15 and Tambang Batubara Bukit Asam is up 17%. This has left them trading at 2008 price-to-earnings multiples of about 15 and at 2009 P/Es of 12.9 and 12.6 times respectively. The indicated price range values Indika at 10.4 to 13.3 times this year's earnings, and at 6.3 to 8 times its expected profits in 2009. This implies a discount of up to 30% versus the peers for 2008 and as much as 50% for the following year.
Investors say they prefer to look at valuations for 2009, partly because this is when increased production and high coal prices are expected to have a full impact on IndikaÆs earnings. Kideco has missed a large part of the price increases in the past six months since it signed contracts for 90% of its 2008 production volume at a price of $45 per tonne during the second half of 2007. The benchmark price of thermal coal averaged about $55/tonne in 2007 and is expected to increase to $96 this year before reversing course and edging towards $87.50/tonne in 2009.
While investors view Indika primarily as a coal producer, the company has grown significantly through mergers and acquisitions over the past three years and currently also owns 100% of the Tripatra group, which is an engineering, procurement and construction business focusing on the oil & gas industry, and a 20% stake in the 660MW Cirebon power plant. The coal-fired plant is however still under construction and isnÆt expected to contribute to earnings until it is finished in 2011. The Kideco Jaya Agung mine is expected to account for about 76% of pre-tax and pre-financing returns in 2009, compared with 17% for Tripatra.
Sales volumes from the Kideco mine are expected to increase at a compound annual growth rate of 8% over the next three years from 20.5 million tonnes last year. In the 1993-2007 period, coal production grew at a CAGR of 21%. Sources say the majority of the IPO proceeds will go towards capital expenditures related to expansion, although a portion will be set aside for working capital.
This is the first Indonesian IPO targeted at international investors this year but it seems it will be followed by a larger one in the same sector after Adaro Energy said earlier this week that it intends to raise at least $500 million from a stock market listing. Adaro Energy is the holding company of IndonesiaÆs second largest coal producer PT Adaro Indonesia.