Four Indonesian equity issuers have taken their first steps to market rights issues, which could raise about $3 billion if market conditions hold firm over the coming month.
The quartet, led by cigarette manufacturer PT Sampoerna, are hoping that small glimmers of improving investor sentiment will continue to push the Jakarta Composite Index up from recent lows.
Year-to-date the index is down 14.5% but has rebounded 5.9% since August 24.
In a research report published in late August, Credit Suisse calculated that Indonesia is no longer one of the four most expensive markets in the region in terms of price-to-book relative to return on equity.
It said the premium has now dropped to 16% from a high of 64% in June. However, it remains above the 11% low the market hit in 2013 when Indonesia was one of the worst affected markets by investors' "taper tantrum".
The JCI is notoriously sensitive to external shocks and has recently been buffeted more than most by fears concerning Grexit, US rate rises, China's slowing growth and the renminbi's devaluation.
In a research note published on August 27, CIMB also cautioned that, while the market is now trading below its 2013 low point in terms of forward price-to-earnings, foreign investors have so far only sold off half the amount they did in 2013.
It said the 2013 sell-off "lasted some 29 weeks, with foreigners selling $5.4 billion on a net basis. The current downturn is entering its 25th week but, at $2.5 billion, has not even reached half the amount sold in 2013."
At current levels, the JCI is trading on a forward p/e of around 13 times and hopes for a rebound are partially pinned on better approval ratings for President Joko "Jokowi" Widodo as he tries to push forward with his ambitious infrastructure programme to maintain economic growth. Thanks to the money saved from scrapping fuel subsidies in the autumn of 2014, the government has been able to funnel savings into much needed infrastructure.
The 2015 budget outlines plans for equity injections of Rp64.8 trillion ($4.6 billion) to 40 state-owned enterprises. The first major company to benefit from this was construction company PT Waskita Karya. In early July the government effectively injected capital into the company through a $396.8 million rights issue, which was priced at a 7.9% discount to the stock's theoretical ex-rights price (Terp).
This was more aggressive than the 11.6% average discount to Terp that Indonesian companies have achieved over the past five years. In a marketing presentation to investors CIMB profiled 16 rights issues, which have raised more than $100 million since February 2010.
The largest is PT BW Plantations, which raised Rp10.8 trillion ($868 million) from a six-for-one deal last December. This came at a 3% discount to the stock's Terp. At the other end of the scale is PT Bank Tabungan Pensiunan Nasional, which raised $146 million from a one-for-five deal at a 49% discount in December 2010.
PT Adhi Karya
Majority government-owned PT Adhi Karya is one of two forthcoming rights issues that incorporate government equity injections related to infrastructure spending.
The construction company has already begun marketing a rights issue that could raise up to Rp4.368 trillion ($461 million), with proceeds funding the first phase of a light transit system.
The 1.82 billion share deal has been marketed on a range of Rp1,510 to Rp2,400 per share, although the company recently said it was pushing back its Extraordinary General Meeting (EGM) from August 27 to September 16 because of market volatility
Year-to-date, the stock is down 44.17% and is trading at 10.34 times trailing earnings.
The government owns a 51% stake in the construction company and will effectively inject about Rp1.4 trillion by taking up its rights.
PT Aneka Tambang
Next in line is 65% government-owned PT Aneka Tambang (Antam). The government has allocated Rp3.5 trillion to purchase new shares in the mining group, which is hoping to raise Rp5.27 trillion ($241 million) to Rp7.6 trillion ($541 million) from a 14.12 billion share deal.
Existing shareholders are being offered 37 new shares for every 25 held on an indicative price of Rp371 to Rp535, which represents a 2% premium to a 14% discount to the stock's Terp.
The rights issue represents 51% to 59.7% of the company's enlarged share capital, with proceeds being used to expand a ferronickel project in East Halmahera.
Pre-marketing will run from September 7 to 11, with a formal management roadshow scheduled for September 16 to 25. The EGM has been scheduled for October 7, with a record date of October 20 and rights trading period between October 22 and 28.
Lead managers are Bahana, Danareksa, Mandiri, CIMB and Credit Suisse.
Year-to-date, Antam is down 53.43% and recently released first-half earnings, which beat analysts' expectations. Revenues almost doubled year-on-year thanks to higher gold sales, although the company also reported higher expenses thanks to FX losses relating to the rupiah's depreciation and higher interest expenses on its foreign-currency debt.
As a result, the company reported a net loss of Rp369 billion. This was 41% lower than the equivalent Rp671 billion loss in the first half of 2014 and above consensus expectations for Rp418 billion.
The biggest deal of the coming quarter will be cigarette maker PT Sampoerna's prospective Rp16.99 trillion ($1.2 billion) to Rp26.7 trillion ($1.9 billion) deal.
The transaction has been expected for most of the year after the stock exchange told the company to increase its freefloat to the 7.5% regulatory minimum. The new deal comprises 267.72 million shares with existing shareholders being offered four new shares for every 65 held.
Under the lead management of Credit Suisse, Goldman Sachs, JP Morgan and Mandiri Sekuritas, the company is marketing its deal at Rp63,000 to Rp69,000 per share. This represents a 20.74% to 21.36% discount to the stock's Terp and dilution of 1.26% at the cheapest end of the range.
Prior to the deal, Philip Morris International owned 98.18% of the group. Year-to-date the stock is up 12.18%, closing Tuesday at Rp75,000 and a valuation of 32.34 times trailing earnings.
After spiking to a high of Rp90,000 on July 23, it has since fallen 16.7%, although it has shown signs of stabilising over the past week.
The cum-dividend date has been scheduled for September 28, with a record date on October 5.
PT Rimo International Lestari
Department store operator PT Rimo International Lestari will hold its EGM tomorrow for a Rp8.1 trillion ($580 million) rights issue, which analysts have described as a backdoor listing.
The group is issuing 30.6 billion shares on a one-for-90 basis and rights price of Rp265. Proceeds are being used to fund the acquisition of a property developer.
Rights issue pipeline
Late last week, two government-owned companies held public meetings at the House of Representatives to discuss proposed capital injections. PT Wijaya Karya and PT PP are two of four companies that have been included in the draft 2016 budget alongside PT Krakatau Steel and PT Jasa Marga.
Construction company Wijaya hopes to raise about Rp4.7 trillion early in 2016. Of this amount, Rp3 trillion will comprise a government capital injection. Proceeds are being used to fund a high-speed train line.
PT PP hopes to raise Rp3.9 trillion for port and toll road projects of which roughly Rp2 trillion will be a government capital injection.
Krakatau Steel, meanwhile, should receive about Rp2.5 trillion from its capital injection. Proceeds will be used to finance the construction of a hot strip mill.
Toll road operator Jasa Marga has a proposed government injection of Rp1.25 trillion and plans to launch a rights issue in early 2016. It had earlier hoped to secure Rp3 trillion from the government.