Institutional books for a 375 million share flotation of Indonesian TV company PT Surya Citra Media (SCM) were closed on Friday after being kept open for an extra day because of volatile equity markets. The deal ended up being completed placement style after the book was re-built at Rp1,100 per share to take into account fall-out in world equity markets triggered by Worldcom last Wednesday.
Originally the deal had been pre-marketed at Rp1,400 to Rp1,550 per share and will net proceeds of Rp214.5 billion ($47 million) pending the completion of the retail offering next week. The institutional portion constituted 70% of the total (subject to clawbacks), with 20% to be allocated to retail and 10% to employees. There is also a 56.25 million share greenshoe of secondary shares, which could bump total proceeds up to $54.9 million.
The book was said to have closed two-and-a-half times oversubscribed at the revised pricing, with participation from 55 foreign institutions and three domestic accounts. Five orders were said to have been for 10% of more. Geographically, the book was also split 60% Asia, 25% US and 15% Europe.
The company is scheduled to be listed on July 16 and will have a 20% free float, leaving majority shareholders PT Abhimata Mediatama and PT Mitrasari Persada to own 40% each. Abhimata Mediatama is a company, jointly held by Australian group STW Communications and Emtek, a local business group, while a small percentage is held by Australian private equity firm, Carnegie Wylie. Mitrasari is owned by a number of people including Henry Pribadi and Argus Lasmono.
STW is said to have had a longstanding association with SCM and the company's ensuing reputation for good corporate governance and a clean balance sheet is said to have been one of the main reasons why it has been able to price at a premium to local comparables. The company also represents foreign investors first opportunity to gain pure exposure to an Indonesian media play since Bimantara owns a number of assets and Salim-owned Indofair is not open to foreign ownership.
Under Indonesian law, foreign investors are not able to directly own stakes in domestic media companies although a bill is being passed through parliament, which may change the situation last this year. As a result, CLSA put the deal together under a holding company structure, enabling foreign investors to participate.
Final pricing came at a 17% premium to Indofair and was completed on p/e ratio of 10.6 times 2003 earnings on a fully diluted basis. The average on the Jakarta Stock Exchange is currently 7.5 times.
"Investors were prepared to accept this because the company has a very good track record and strong management who have enforced firm cash controls and installed independent directors," says one observer. "There was also a very good hit rate from emerging markets funds in the US since it's quite difficult to get exposure to good quality media companies in Asia.
"Media companies tend to trade at a premium to the market average," he adds, "because they have much faster growth forecasts."
According to CLSA research, ad spend in Indonesia jumped 34% year-on-year during the first quarter. SCM, which runs SC TV, has the biggest advertising share of a 10-channel domestic market (25%) and second biggest audience share (23%). Operating revenue for 2001 totaled Rp241 billion ($27.8 million).
The retail offering will run from July 3 to July 5.