UPDATE 1-Strong debut by Sawit Sumbermas augurs well for Indonesian palm oil firms
(Adds fund manager and analyst comment, context)
* Sawit Sumbermas rises as much as 12 percent on debut
* Stock trades at a PE ratio of 9 times
* CPO price up around 14 pct since early October
By Andjarsari Paramaditha and Fathiyah Dahrul
JAKARTA, Dec 12 (Reuters) - A strong trading debut by an Indonesian palm oil producer could be a sign of renewed investor appetite for the plantation sector, lured by cheap valuations, a pick-up in crude palm oil prices and new biofuel regulations.
Shares of PT Sawit Sumbermas Sarana rose as much as 12 percent in its debut on the Jakarta stock exchange on Thursday. The company raised around 1 trillion rupiah ($83.4 million) in the biggest initial public offering in the Indonesian plantation sector so far this year.
"The IPOs for palm oil companies are relatively cheap compared to the listed ones. The valuations are lower with PE at around 7.8 times, while CPO stocks are traded around 13 times," said Jemmy Paul, a Jakarta-based equity fund manager at Sucorinvest Asset Management.
Foreign institutions make up 81 percent of Sawit Sumbermas' investor base, while domestic and retail investors account for the rest, Iman Rachman, a managing director at Mandiri Sekuritas, told reporters at a briefing. The stock is trading at a price-earnings ratio of 9 times, he added.
Mandiri, BNP Paribas and RHB-OSK were the underwriters for the offering. Sawit Sumbermas is expected to post a 10-15 percent growth in revenue and profits next year, the company's finance director, Harry Nadir, said.
Investor interest in the plantation sector had been muted in the first half of this year with many firms trimming their IPO sizes. The offerings of Multi Agro Gemilang Plantations , Austindo Nusantara Jaya Plantation and Dharma Satya Nusantara Plantations managed to raise just under 500 billion rupiah each.
Another plantation company, state-owned PT Perkebunan Nusantara VII, aims to sell a 30 percent stake worth up to 2 trillion rupiah in the second half of 2014.
The price of crude palm oil has risen around 14 percent since early October, driven by stockpiling ahead of the Chinese New Year and supply concerns after floods in Malaysia.
Many plantation companies are also expected to benefit from a weakening rupiah -- down some 20 percent against the dollar this year -- as they incur costs in rupiah and book sales in U.S. dollars.
"The palm oil sector is the sector that benefits most from the current weakening rupiah," said Hariyanto Wijaya, a plantation analyst at Mandiri Sekuritas. "Therefore, we think it's time for tactical asset allocation by accumulating good proxies of the plantation sector."
The sector may also get a boost from a new regulation raising the minimum bio content in diesel to 10 percent, up from levels of 3-10 percent, analysts said. The regulation is expected to take effect next year.
However, the sector has also come under scrutiny by environmental groups that have accused several companies of illegal forest destruction.
($1 = 11,990 rupiah) (Writing by Eveline Danubrata in JAKARTA; Additional reporting by Niluksi Koswanage in KUALA LUMPUR, Editing by Jonathan Thatcher and Sunil Nair)