Investors are said to be flocking to Bumitama Agri’s initial public offering in Singapore – the first new listing of size in the Lion City this year.
The Indonesia-based producer of palm crude oil and palm kernel is aiming to raise between S$200.9 million and S$221.6 million ($159 million to $176 million) and even before it launched the bookbuilding on Monday it had allocated 42% of the shares on offer to six cornerstone investors. It was not too surprising therefore that joint bookrunners DBS and HSBC were able to go out with a “books covered” message at the end of the first day.
However, sources say that the orders have continued to flow at a steady pace since then and the quality of the order book is said to be high.
Part of the attraction is that the company’s palm trees are still quite young, which means they have yet to reach peak production levels, suggesting Bumitama is well positioned for strong growth in the years ahead. It will use the majority of the IPO proceeds to cover the capex related to the expansion and development of its uncultivated landbank and of its existing oil palm plantations. A small portion (S$12.6 million) will be used to repay a shareholder loan.
The company is also backed by Malaysia’s IOI Corp, which is one of the largest palm oil players globally with operations ranging from plantations to palm oil refinery and processing, and is viewed as having a good management
Valuations aren’t cheap, but given the company’s attractive market position, investors seem to think that they are at least reasonable. The price range values Bumitama at 10 to 11 times its forecast earnings for 2012, which compares with an average 11.8 times for other palm oil companies that are listed in Singapore and 10.8 times for the Indonesian palm oil producers. The Malaysian palm oil sector trades at an average 2012 price-to-earnings multiple of 15.7 times.
Bumitama is offering 297.57 million shares, of which 91.9% are new. Aside from the 42% cornerstone tranche, another 52% of the deal will be targeted at institutional investors, while the remaining 5% to 6% has been set aside for domestic retail investors. The total base deal accounts for 16.9% of the enlarged share capital. There is also a 10% greenshoe of all secondary shares, which could boost the total proceeds to as much as $194 million.
The shares are offered at a price between S$0.675 and S$0.745.
The institutional order book will close on Monday (April 2) and the price is expected to be fixed the following day. The listing is scheduled for April 12.
