(Changes IPO price range calculation based on prospectus,
* Record $4.1 bln of IPOs had been expected in 2013
* High valuations, market volatility have unnerved investors
* Slowdown clouds outlook for $1.6 bln IPO pipeline in H2
By Janeman Latul and Saeed Azhar
JAKARTA/SINGAPORE, June 21 The spark that
Matahari Department Store's $1.3 billion deal was meant to
provide Indonesia's IPO market has turned into a dud.
Investors have bailed on Indonesian stock offerings, spooked
by a wave of global market volatility and pricey valuations. The
retreat from Jakarta by local and foreign funds is threatening
other IPOs in the pipeline and hindering the ability of
Indonesian tycoons to unlock money from their businesses.
Bankers and issuers were anticipating a record $4.1 billion
worth of initial public offerings in 2013, including $2.5
billion in the first half of the year. The Matahari
deal in March - in which private equity firm CVC Capital sold
down its stake in Indonesia's biggest stock sale since 2011 -
was seen as a stage setter.
The outlook for the market still appears positive given
Indonesia's economic prospects. But in the last few months,
Jakarta IPOs are being cut in half or abandoned altogether.
"People were thinking that they were sitting on a pile of
gold," said an investment banker who covers Southeast Asia,
referring to Indonesian equity deals. "The recent correction is
making everybody's expectations much more realistic."
Indonesia's leading shariah lender, PT Bank Muamalat, said
on Friday that it had postponed its up-to $177 million IPO
because of recent stock market declines.
Muamalat had earlier dropped Credit Suisse and
Deutsche Bank as advisers after an investor roadshow
failed to generate strong interest, people familiar with the
deal said. Spokeswomen for Credit Suisse and Deutsche Bank
declined to comment.
And earlier this month, investment firm PT Saratoga
Investama Sedaya raised less than half of the $395
million it was seeking, hurt by concerns about its lofty
"Our market is quite expensive," said Fadlul Imansyah, an
equity fund manager at Jakarta-based investment firm CIMB Niaga
Asset Management. "Investors want a more reasonable price."
The gloom could hurt prospects for the planned listings of
Lippo Group's Siloam Hospitals, Indonesia's biggest private
healthcare operator, and PT Pembangunan Deltamas, the country's
largest industrial park. They are among firms seeking to raise a
total $1.6 billion in the second half of 2013.
Indonesia's main stock index has slid around 15
percent from a record high hit just a month ago and the rupiah
has dropped sharply, as speculation that the U.S. Federal
Reserve will reduce its stimulus programme prompted foreign
investors to pull money out of emerging markets.
Jerome Leleu, co-head of equity capital markets Asia-Pacific
at Morgan Stanley, said it was a temporary slowdown in the IPO
market caused by global volatility and outflows from emerging
economies in general.
The overall outlook remains strong given Indonesia's
attractive macroeconomic backdrop, but the window for issuers is
small given presidential elections next year, he said.
"We are also getting into an election period for 2014 and
that will create, by definition, some volatility in the domestic
market," he said. "For the IPO market, the challenge is more
about timing than fundamentals."
But the market has also been hit by concerns about high
valuations that led to most Indonesian IPOs being priced at the
bottom of their marketing ranges this year.
By contrast, neighbouring countries have seen a stream of
strong offerings. The $2.13 billion IPO of infrastructure fund
BTS Group Holdings Pcl in Thailand and the $1.3 billion
Singapore IPO of Mapletree Greater China Commercial Trust
both priced at the top of their ranges.
Saratoga, controlled by local tycoons Edwin Soeryadjaya and
Sandiaga Uno, had expected to raise $395 million in the nation's
biggest IPO since 2011, according to its prospectus.
Its original price range of 6,100-7,800 rupiah per share
offered no discount to its net asset value if it was priced at
the top the range, reflecting huge confidence from the
Soeryadjaya family that investors would buy the shares.
However, it was forced to cut the offering size to 10
percent from the original plan of 15 percent and revised down
its IPO price range to 5,500-5,600 rupiah per share, reflecting
a 20 to 19 percent discount to the net asset value, according to
Reuters calculations from the company's prospectus.
In the end, it managed to raise only $152 million.
Among the IPOs next in line are those of Blue Bird Group,
Indonesia's biggest taxi operator, and budget airline PT
Indonesia Airasia, a unit of Malaysia's Air Asia Bhd.
The Blue Bird IPO is seeking the same price-to-earnings
ratio as consumer giant PT Unilever Indonesia. People
briefed on the deal say reaching that valuation may be tough.
"I think the second half will very much depend on the global
market and foreign inflows," said Jemmy Paul, equity fund
manager at PT Sucorinvest Asset Management in Jakarta. "I think
the interest for IPOs will run out of steam if the market stays
(Additional reporting by Andjarsari Paramaditha in JAKARTA and
Anuradha Subramanyan from IFR in SINGAPORE; Editing by Michael
Flaherty and Chris Gallagher)