Indonesian property developer Puradelta Lestari started investor education ahead of an initial public offering that could raise roughly $200 million to pay for infrastructure at industrial parks.
On offer will be up to 10.8 billion primary shares — or approximately 20% of the total enlarged share capital — in the industrial estate developer, also known as Deltamas, according to a term sheet seen by FinanceAsia. Citi, CLSA, Macquarie and Nomura are the joint bookrunners for the international tranche, while Macquarie, Sinarmas Sekuritas and CLSA are overseeing the domestic book.
It is the latest attempt by the real estate developer to come to market after pulling its IPO in August 2013 due to weak market conditions.
The investor education will take management to Jakarta, Singapore, Hong Kong, Malaysia and London over the next two weeks. The indicative price range will be formally set on May 4, with pricing and allocation scheduled for May 12.
Some 60% of the IPO proceeds will fund infrastructure, such as roads, electricity and water, as well as residential housing, parks and other facilities, which Deltamas then sells to various industries for factory development. Thirty percent will be used for future land acquisitions and 10% for working capital, the term sheet said.
Deltamas is a subsidiary of Singapore-listed Sinarmas Land. Sojitz Corp, a Japanese trading house with businesses ranging across machinery, energy and metals, chemicals and consumer lifestyle, holds a 25% stake in Deltamas.
Post IPO, Sinarmas Land will see its stake in Deltamas drop to 40% from 50%, while Sojitz Corp’s stake will drop to 20%, both through share dilution as opposed to selling shares in the IPO, a source close to the deal told FinanceAsia.
Deltamas owns about 3,000 hectares of industrial land along one of the major highways in the Greater Jakarta area. It develops self-sustaining industrial estate under the name Kota Deltamas. Some 50% of the land will be occupied by industries and factories, 25% by retail outlets, schools, a hospital and other public spaces, and the remaining 25% by residential housing.
In its earlier IPO bid in 2013, one global long-only fund was willing to anchor the deal with $30 million, but only if the price was reduced to Rp180 per share, down from the initial offering range of Rp205 to Rp255. Deltamas wound up cutting the deal from $300 million to $191 million. A sharp sell-off in Indonesian industrial real estate developers during the bookbuild eventualy led to the deal getting shelved.
The issuer is undoubtedly hoping to take advantage of ongoing investment into the country’s infrastructure. Under President Joko “Jokowi” Widodo’s administration, the government is already allocating some of its budget towards roads and ports. Its current ports upgrade in particular is unprecedented, a scheme that involves modernising existing ports buckling under increased traffic and infrastructure issues. It also aims to build a raft of new ports.
In addition, more foreign investment into the country will lead to more factories being constructed, which will directly benefit industrial estates such as Deltamas and Bekasi Fajar Industrial Estate, considered the company’s closest comparable, according to Daewoo Securities research.
Bekasi Fajar is trading at 14.91 times its 2014 earnings and at 10.86 times its estimated 2015 earnings. Shares have risen 14.2% in the past 12 months but have dropped 17.1% year-to-date.
Bekasi Fajar reported net profits of Rp391 billion in 2014, down 47.7% from Rp744 trillion in 2013. “Nevertheless, we have a positive view ahead as we expect higher marketing sales to allow for a pick-up in the 2015 bottom line,” said Daiwa Capital Markets and Bahana Securities research dated April 2. In addition, the Cibitung-Cilincing toll road — a project that will reportedly cost Rp6.5 trillion — will help boost Bekasi Fajar’s industrial land sales, the research added.
Still, Deltamas will have to cope with a number of negative factors during its roadshow. Consumer confidence in Indonesia dropped in March due to a bleak economic outlook, according to Daiwa and Bahana research dated April 6, citing central bank surveys. The Bank Indonesia’s Consumer Confidence Index, based on a sample of roughly 4,600 households in 18 major cities across the country, declined by 3.3 points from February to 116.9 in March, the April 6 research said.
And despite a 10.4% 12-month rise in the Jakarta Stock Exchange Composite Index, year-to-date it is only up 3.3%, an unimpressive rise given the buoyancy of regional capital markets. The MSCI Emerging Markets Asia Index for example has risen 12.23% in the same time period.