For the second time this year, two of the controlling shareholders in Indonesia’s Tower Bersama Infrastructure sold down their stakes in the company last night, raising Rp1.207 trillion ($125 million).
Indonesian private equity firm Saratoga Capital and Karya Investments, which is a unit of Provident Capital, took advantage of a strong share price performance in recent months to satisfy calls by other investors for better liquidity in the stock. Since their previous placement in March, the stock is up 95% and yesterday it jumped 6.4% to a new record close of Rp5,800.
Despite that, there was a big appetite for the shares, which allowed the bookrunners to increase the deal size to $125 million from $75 million by exercising the upsize option in full. They also fixed the price at the top of the range for a tight 0.9% discount to the latest close.
Tower Bersama, which owns and operates telecom towers across Indonesia, offers much faster growth than its counterparts in the US as it continues to expand its portfolio to keep up with the increasing number of mobile phone users and amount of data traffic in Indonesia. At the same time, it operates in a somewhat defensive sector and, as investors also view it as a very well-run company, it is seen as a good way to play the Indonesian story.
However, as many of its shareholders tend to buy and hold the stock, it has been quite difficult for investors to get their hands on more paper ever since the IPO two years ago. The block trade in March technically increased the free-float to about 29%, but the daily liquidity is still quite low.
Based on the average daily volume during the past month, this deal accounted for about 70 days of trading. A source noted that the stock currently trades about $2 million per day, which is an improvement from just $1.5 million about six months ago, but still not much for a company with a market capitalisation of $2.9 billion.
Investors have been increasing their buying of shares in Tower Bersama during the past few weeks after the company reported another strong set of results at the start of this month. The management has also been on the road doing some marketing since then, while the tower sector as a whole has come into focus because of the upcoming IPO of Indian tower company Bharti Infratel. The latter, which may raise as much as $900 million, should have all the approvals in place to launch the deal in early December, according to sources.
On the back of all this, sector specialists and US-based investors in particular were pushing for a bigger liquidity event in the Tower Bersama stock and when the deal launched after the market closed yesterday, the bookrunners had confirmed demand for almost the entire base deal.
When the order books closed at 15 minutes past midnight Hong Kong time, the full deal size, including the upsize option, was well oversubscribed. The bulk of the demand came from the US, where investors are very familiar with telecom tower infrastructure businesses because of the many similar companies in their domestic market, complemented by some Asian demand.
The buyers included both existing shareholders and new investors, although one source noted that the biggest orders came from new accounts. Not surprisingly, given the tight discount, most of the buyers were long-only funds. In all, about 25 investors came into the deal, but the allocations were said to be heavily concentrated towards the top of the order book.
The deal was launched as a $75 million transaction — with a $50 million upsize option — rather than with a specific number of shares on offer. Based on the final price, the vendors ended up selling approximately 210 million shares, which account for about 4.4% of the company.
The shares were offered at a price between Rp5,600 and Rp5,750, which translated into a discount of 0.9% to 3.5%. As noted, the price was fixed at the top of the range at Rp5,750 resulting in a 0.9% discount.
This was well below the 2.5% discount that the vendors achieved in March, when they raised $100 million from the sale of a combined 6.9% stake in the company. In that first block, Provident and Saratoga were joined as sellers by an unidentified individual investor.
There was no information about how many shares each of the sellers parted with this time, but both firms will remain significant shareholders after the transaction. They will each be subject to a three-month lock-up. Before the deal, Provident Capital owned 23.8% of the company, while Saratoga Capital had a 17% stake, Bloomberg data show.
Tower Bersama posted a 65% increase in revenues to Rp1.138 trillion during the first nine months this year, compared to the same period last year, and a 70% gain in earnings to Rp920 billion. This was despite the fact that its acquisition of 2,500 telecom towers from telecom operator Indosat was only completed on August 2, meaning that less than two months of revenue from those towers were actually reflected in the results.
As of the end of September, the company had 12,953 tenants and 8,171 telecommunication sites. The telecommunication sites comprised 6,714 telecommunication towers, 1,040 shelter-only sites, and 417 DAS networks.
“The acquisition of 2,500 towers from Indosat is an important milestone for our company. However, we are equally pleased to report another quarter of stellar organic growth. Overall, we were able to add 4,369 tenants during the quarter,” Tower Bersama’s CEO, Hardi Wijaya Liong, said when the earnings were released.
He added that the earnings margin (before interest, tax, depreciation and amortisation) continues to improve, from 79% in 2011 to 81% in the nine months to September this year.