Coal miner Toba Bara Sejahtra has slashed the size of its initial public offering after the share sale was snubbed by investors, making it the second Indonesian company to scale back an IPO plan this week.
Analysts in Jakarta said that Indonesian companies attempting IPOs have struggled to lure investors amid global uncertainty and the euro-zone crisis.
Reza Priyambada, an analyst with Indosurya Asset Management, said that difficult global market conditions were dampening demand for risky assets, including stocks. “The condition of the market is the trigger for all those scaling down IPOs,” Reza said.
Toba Bara cut the size of its IPO to 10.5 percent of its capital from the 15 percent announced two weeks ago. “The reason is because the valuation is so cheap,” Pandu Sjahrir, finance director at Toba Bara, told the Jakarta Globe in a text message.
The company has now set its IPO price at Rp 1,900 apiece and expects to raise Rp 400 billion ($42 million) early next month, compared to a potential Rp 763 billion under the earlier plan. Early plans from the company were believed to involve a share offer of up to 25 percent.
Kobexindo Tractors, another coal miner, cut its IPO size to 12 percent from the original plan of 30 percent, an underwriter representing Kobexindo told Investor Daily on Tuesday. Global Teleshop, a mobile-phone distributor, cut its IPO size to 10 percent from 20 percent even before it entered the book-building period.
“Stocks of heavy equipment and mining companies are the ones that we are avoiding right now,” said Edwin Sebayang, head of research at MNC Securities in Jakarta.
He said that with more established companies in the same sector already trading cheaply on the Indonesia Stock Exchange (IDX), investors saw little need to buy stocks in the IPOs.
The scaling back in the IPOs of Indonesian companies underlies deteriorating sentiment in the local market, which rose 3.2 percent last year. The benchmark Jakarta Composite Index lost 1.2 percent to close at 3,887.58 in Jakarta on Thursday. The main stock gauge has risen 1.7 percent so far this year.
Edwin said that falling coal prices would push investors to sideline mining stocks, including those coal miners.
Analysts forecast coal prices to drop further in the next few months before a recovery in the fourth quarter of the year.
“The decline in the coal prices will threaten coal miners’ financial performance,” Edwin said.
Fellow analyst Reza said that companies would continue to delay plans for equity raisings, while those that have already completed their pre-offering process will have little choice but to accept lower than expected IPO proceeds.
There have been six listings on the Indonesian bourse so far this year, compared to 10 in the same period in 2011.
Ito Warsito, president director of the IDX, expressed optimism that the exchange would hit its target of 25 IPOs this year. He said 10 were in the pipeline but did not explain how the gap would be filled.
Toba Bara started offering the shares on Wednesday, with a listing on the exchange planned for next Thursday.
Toba Bara was founded by former Trade Minister Luhut B. Pandjaitan in 2010. It has hired Mandiri Sekuritas, Morgan Stanley Asia Indonesia and CLSA Indonesia as underwriters for the IPO.