2017 a Good Year for IPO in Indonesia

Over the past decade, the impact of terror attacks on the Jakarta Composite Index (JCI) have become less noticeable, ranging from a 0.55 percent decline in the day after suicide bombs attacks on the J.W. Marriot and Ritz-Carlton hotels in South Jakarta in July 2009, to a 0.23 percent increase after the suicide bomb attack at Kampung Melayu in East Jakarta in May this year. (Reuters Photo/Iqro Rinaldi)

By : Sarah Yuniarni | on 11:36 AM May 18, 2017
Category : Business, Markets

Jakarta. Initial public offerings are set to bounce back at the Indonesia Stock Exchange this year, with investors anticipating huge offerings in the second half thanks to a more confident market taking cues from improving macroeconomic conditions.

A total of 31 companies have announced plans for or conducted an IPO this year, seeking to raise more than Rp 24 trillion ($1.8 billion) in fresh capital.

In comparison, 15 new companies completed their IPO last year, raising Rp 12.1 trillion in fresh capital.

So far this year eight companies have already gone public, with five others confirmed to conduct IPO in June, including construction company Totalindo Eka Persada — which seeks to raise Rp 1 trillion, larger than the Rp 937 billion raised by the previous eight companies combined.

"Indonesia's improving macroeconomy has given companies a confidence boost to go for IPO. More companies have undertaken IPO this year compared to last year," Binaartha Sekuritas analyst Nafan Aji told the Jakarta Globe.

Indonesia's economic growth accelerated to 5.1 percent in the first quarter of this year, up from 5 percent in the previous quarter, thanks to rising commodity prices and a pickup in demand from the country's trading partners that have rebounded the country's exports.

OSO Sekuritas analyst Riska Afriani said investors' appetites for new offerings are high.

Some of the newly-listed stocks have increased more than 100 percent in value since their trading debut on the IDX.

Property developer Sanur Hasta saw its stock price rise more than six times since its debut, the highest among newly-listed companies.

Other local property developers Forza Land Indonesia saw its stock price up by 177.27 percent and Cahaya Sakti Investindo Sukses by 126.67 percent.

Nusantara Pelabuhan Handal, a local container terminal operator and the first company to go public this year, did record a decline of 4.67 percent, while automotive dealer Bintraco Dharma's stock price has gone down 2.29 percent.

Riska noted the IDX has been very proactive in streamlining issuance procedures and encouraging companies in second- to third-tier cities in Indonesia to conduct IPO.

"Dozens of companies have already applied for IPO. Some of them are currently seeking approval from the OJK [Indonesia's financial services regulator]," Riska said.

Heavy second half 

With all these IPOs lined up for the second half of this year, including huge offerings by state-owned companies GMF Aero Asia, PP Peralatan Konstruksi and PP Urban — all seeking to raise above Rp 3 trillion each — the IDX is more than confident of meeting its target of 35 IPOs this year, IDX Listing Director Samsul Hidayat said.

Aside from Totalindo, jewelry manufacturer Hartadinata Abadi, automotive multi finance First Indo American Leasing, coal miner Alfa Energi Investama and rubber company Kirana Megatara are also lining up for an IPO in June, Samsul said.

Recapital Securities analyst Kiswoyo Adi Joe said companies prefer to conduct their IPO later in the year because they want to confirm the market's positive momentum and increase their chances of reaping more capital.

"Companies are waiting for the JCI to stay bullish — above 5,500 — to boost their confidence for the IPO," Kiswoyo said, referring to the benchmark Jakarta Composite Index.

The index has been above 5,500 for more than eight weeks now, supported by strong inflow in foreign buying and positive companies' earnings growth in the first quarter.

Construction sector looking good

OSO Sekuritas's Riska said her top pick sector would be construction, on the back of a boom in the government's infrastructure projects.

"Totalindo's performance is promising, especially its new contracts and financial performance," Riska added.

Totalindo reportedly is targeting Rp 3 trillion in new contracts this year, 50 percent higher than last year's Rp 1.5 trillion. The company has already booked Rp 1.5 trillion worth of new contracts as of May.

While agreeing with Riska's pick, Binaartha's Nafan said investors should pay attention on how the companies use their IPO proceeds.

"If the proceeds are used for expansion, that will boost the company's performance in the near future," Nafan said.


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