Indonesia's Aneka Gas Industri hit the road to pitch its Rp989 billion ($75 million) domestic IPO on Monday, making the most of a local equity rally that has pushed the stock market to an all-time high.
The company set out on a management roadshow at the start of the week, asking investors to consider a 767 million share sale at a price range of between Rp1,000 and Rp1,290 per share, according to a termsheet seen by FinanceAsia. That looks like an aggressive target when compared to its peers.
State-owned gas distributor Perusahaan Gas Negara, for example, trades at 13.3 times earnings on a rolling twelve-month basis. As long it manages to price inside its range, Aneka will have a much higher multiple. The price range values the company at 16.8-21.6 times its estimated 2017 post-tax profit, according to bankers.
But given the rally in the stock market this year, the company could be forgiven for believing it will get away with a punchy multiple.
The Jakarta Composite Index has been the second best performer among major Southeast Asian stock indices this year, gaining 18% since the start of January. The index hit a record high of 5,461 points last week, and remains close to that level despite a lacklustre start to this week.
Rally racing
Indonesia’s stock market has been picking up since president Joko Widodo unveiled a series of economic reforms last September, aiming at reducing inflation and stabilising the exchange rate.
Jokowi’s reforms appear to be bearing fruit. Indonesia’s economic growth accelerated to 5.18% in the second quarter compared with 4.66% last year, after a similar rise in the first quarter. The growth bump was driven by a boost in government spending and household consumption, according to data from Statistics Indonesia.
The growth story has laid a clear foundation for the stock market rally. But some analysts believe it could advance further as Bank Indonesia is expected to cut its policy rate by the end of the year.
In the monthly review last week, Bank Indonesia kept the seven-day reverse repo rate — which it also adopted at its new benchmark monetary pool — at 5.25%. But with inflation largely under control, the central bank said there is still a possibility of another rate cut this year to boost liquidity and accelerate economic growth.
Government plans a boost
Aneka Gas has a long history in Indonesia, having been established by a Dutch firm in 1916 when the Southeast Asian country was a Dutch colony. In 2004, after turns being a state-run company and a holding of foreign investors, it was taken over by Samator Group, a local conglomerate with businesses including gas distribution, auto dealership, engineering and construction, and real estate.
Aneka Gas is a key supplier of industrial and medical gas in Indonesia with a 30% domestic share. Its main competitors include the state-owned Perusahaan Gas Negara, as well as France's Air Liquide and Germany's Linde Group.
One of the selling points of the IPO is the high entry threshold into Indonesia’s gas distribution business. The fact that Indonesia is the world’s largest island country makes it very hard for new comers to compete with Aneka Gas in terms of network and scale.
It is also likely to be supported by the government’s plan to increase electricity supply in the face of growing demand. In order to increase power accessibility to 98% of the country’s population by 2022, the government has set an ambitious goal of adding 35 gigawatts of new capacity by 2019.
Following the state plan, Aneka Gas increased its overall gas capacity by 43% to 532 million cubic metres in 2015 from 372 cubic metres a year earlier.
The numbers
The 767 million share offer is equivalent to 25% of the company’s enlarged share capital. There is a 20% greenshoe option that allows existing shareholder Aneka Mega Energi to sell 153.3 million shares.
At the indicative range, Aneka Gas will be valued at 16.8 times to 21.6 times estimated 2017 post-tax profit of Rp183 billion, based on syndicate consensus estimates. Its estimated market capitalisation of $300 million will equate to 6.7 times to 7.7 times EV/Ebitda on a forward basis.
Syndicate analysts expect Aneka Gas to post strong revenue growth in the second half of this year on the back of solid industrial gas sales and rising income from the installation of medical equipment.
Aneka Gas’ post-tax profit is also expected to improve after the IPO as it reduces its leverage. Fitch warned earlier this year that it was considering cutting the A- rated company’s credit rating as its net debt-to-Ebitda stood at a staggering 6.1 times at the end of 2015.
The subscription period for the IPO started Monday and will end September 5. The domestic offering will be conducted between September 19 and September 22 before trading begins on September 28.
DBS, Mandiri Securities and RHB Securities are joint bookrunners of the IPO.
Aneka Gas is set to be the eleventh IPO out of Indonesia this year and the second internationally-marketed deal after power producer Cikarang Listrindo’s $272 million IPO in June.
