Global Business Guide Indonesia

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Business Updates | Indonesia Market Watch: IPOs in 2014

Following an eventful end to 2013 that saw the postponement of several public listings, the Indonesian Stock Exchange (IDX) marked the start of a new year with the announcement of 30 companies expected to conduct an IPO in 2014. Headlining those going public are industry leaders in a host of key sectors such as infrastructure and public transport as well as others positioning themselves to expand in line with rising consumer purchasing power.

Despite the buzz that surrounds these IPOs, the question remains as to whether 2014 stands to be a tricky year for investment in Indonesia’s capital market given the upcoming presidential election. Wary of investor reticence attributed to political uncertainty and a shift in regulations brought about by a new government, many companies listing in 2014 have tentatively scheduled their public offerings for after the election. The recent success of landmark IPOs that have already gone forward – such as the 8th April IPO of concrete manufacturers Wijaya Karya Beton, whose shares rose by more than 50% during its trading debut despite taking place one day prior to Indonesia’s legislative election – however, suggests a more positive investment climate than previously anticipated. Moreover, there is reason to believe that regulatory changes, should they be made, may in fact widen the scope of opportunities for investors to gain a foothold in Indonesia via well established businesses now ready to open up to public funding.

A Sign of Things to Come?

As first reported on 14th November 2013, Indonesia’s Financial Services Authority (OJK) through collaboration with the IDX decided to remove a provision that required mining companies to record operating profit for a minimum of one year prior to being allowed to submit an IPO proposal. This revised regulation, scheduled for implementation in 2014, will make it easier for businesses in the mining industry to obtain capital through IPOs to fund exploration and the construction of smelters (now required of mining companies in Indonesia, see The Question of Indonesia’s Unprocessed Ore Export Ban), insofar as they have demonstrated proven reserves via a report from the Joint Ore Reserves Committee (JORC).

This development bodes well for projects such as the Tujuh Bukit mine, worth a projected $4 billion USD and recognised as one the world’s largest undeveloped copper lodes (Reuters). With a relaxation of requirements that would have in the past prevented it from listing, Tujuh Bukit plans to carry out its IPO in Q3 2014 to raise $75 million USD; thereby making available a highly lucrative opportunity to obtain shares in a company expected to profit from an estimated 1.6 million ounces of gold in addition to a huge supply of copper.

The Tujuh Bukit IPO and the revised policies that make it possible are indicative of a government conscious of the need to facilitate the listing of companies on the IDX, which still trails behind exchanges in Singapore (774) and Malaysia (940) with only 492 companies listed (as of April 2014).

Stakes in State Owned Enterprises

In the aftermath of putting in place regulations that should allow for more IPOs, the Indonesian government has also sought to encourage a deepening of the country’s capital market by listing state owned enterprises. In addition to the positively received IPO of Wijaya Karya Beton, a subsidiary of state owned construction company Wijaya Karya, 2014 will bear witness to the public listing of plantation businesses Perkebunan Nusantara V and Perkebunan Nusantara VII. These companies specialise in the cultivation of commodities including sugar, palm oil and rubber. The aforementioned offerings come at a key time as Indonesia gears itself towards self-sufficiency in food and energy and moves towards ensuring a supply of commodities for downstream industries such as biofuel (See Opportunities in Indonesia's Downstream Sugar Industry and An Overview of Indonesia's Palm Oil Industry).

Also planning to carry out an IPO is Pelindo III, a SOE tasked with the management and operation of ports in Central Java, East Java, South Kalimantan, Central Kalimantan, East Nusa Tenggara, West Nusa Tenggara and Bali. Tentatively scheduled for Q4 2014, this listing offers investors with the opportunity to strategically take advantage of rising trade between Indonesia’s main commercial centres in Java and eastern islands poised to play a substantial role in the archipelago’s continued economic development (See Unleashing the Potential of Indonesia’s Eastern Islands in 2014).

Transportation; On the Move

Among the most highly publicised 2014 IPOs are those of companies in the public transport industry. Growing concerns over the pace at which Indonesians are purchasing cars (See Indonesia’s Automotive Industry) coupled with an inadequate network of roads has placed an onus on the development of public transport, particularly in major cities now faced with the prospect of total gridlock. With the launching of Jakarta’s MRT still at least four years away, the capital city’s Transjakarta Busway service remains the primary means of affordable, organised public transport and is to undergo an expansion process that will facilitate a greater presence in satellite cities and expedite integration with the planned MRT network.

A provider of buses to Transjakarta, Eka Sari Lorena plans to conduct an IPO on 15th April 2014. In keeping with rising demand for bus transport, the IPO aims to raise 135 billion IDR to be used to purchase a new fleet of Mercedes Benz buses and invest in land for the construction of bus depots. The company plans to make available 40% of shares at 900 IDR each, and has been well received among investors, as evidenced by the IPO already being oversubscribed by four times. Part of this positive sentiment is being driven by the success of Indonesia’s only other publically listed bus operator, Cipaganti Citra Graha, which recently announced its plans to float upwards of another 10 million shares on the back of accelerated growth fuelled by its investment of capital from an IPO conducted in July 2013.

As evidenced by the presence of only two bus operators on the IDX, chances to invest in this industry have thus far been few and far between. Investors are therefore presently faced with a prime opportunity, particularly in the case of well-established companies such as Eka Sari Lorena (already the third largest bus operator in Indonesia) that take upon the role of pioneers in leading their industry into the Indonesian Stock Exchange.

2014 is also expected to mark the public offering of Indonesia’s foremost name in taxicab services: Blue Bird. Initially planned for 2013 but delayed due to legal complications no longer viewed as a major hurdle, Blue Bird’s IPO stands to be the most highly valued since Garuda Indonesia’s $524 million USD sale in 2011. Though no formal date has yet been established for this listing, Blue Bird intends to offer 20% of its shares to raise $400 million USD and expedite the company’s expansion in Indonesia. The scope of this expansion is substantial; the penetration of taxis in Greater Jakarta, the easiest place to get a cab in Indonesia, only stands at 1.4 taxis per thousand people, a figure that lags far behind Bangkok (10.2 cabs per thousand people) and Singapore (5.3) despite the fact that these cities also offer fully developed MRT alternatives.


Indonesia is currently in the midst of a period in which both the government, through the relaxation of industry specific IPO provisions and the decision to list SOEs, and leading private sector players have sought to engage the public as a means of funding further business expansion. Behind these decisions is a domestic market flourishing with a rise in purchasing power and an emerging middle class. Expansion has in many cases been necessitated by unprecedented local demand for energy, services such as transportation and shipping, as well as essential goods such as foodstuffs.

Emblematic of this trend is the strong performance of the recently listed Graha Layar Prima, operator of cinema chain Blitzmegaplex, which on 11th April floated 140 million shares (46% of enlarged capital) to fund the development of seven new cinemas across Java. As the first cinema operator to go public, Graha Layar Prima is very much representative of the 2014 Indonesian IPO story in that it presents opportunities for investors to enter industries already in their sunset period in other markets but with substantial room to grow in Indonesia. Much in the same way that taxis have yet to fully penetrate the local market, there are presently only 700 cinema screens in Indonesia catering to a population of 260 million. Rising leisure spending will require a drastic and immediate improvement of this low screen to population ratio.

All told, much still depends on the results of Indonesia’s presidential elections in July. In the immediate future, investors should keep an eye on the impact of the 9th April legislative election, which some fear could spark a sell-off of stocks in Indonesia following results that did little to ease political uncertainty. Going against this expectation is the fact that elections in 2004 and 2009 were both marked by increases in IDX indices, as well as the perception that consumer confidence remains buoyant (See Indonesia’s 2014 Election; What to Expect for Business). As to which of these outcomes plays out over the next few weeks will more clearly establish what is to be expected for Indonesia’s IPOs in 2014.

Global Business Guide Indonesia - 14th April 2014

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Indonesia Finance Snapshot - Capital Markets

Bourse Name: Bursa Efek Indonesia (IDX)
Main Index: Jakarta Composite Index
Market Capitalisation: 5.6 trillion IDR July, 2016)
Annual Performance: 11.97% (2016)
Record High: 5,523.29 (April 2015)
Number of Issuers: 523 (2015)
Top Stocks by Market Capitalisation: HM Sampoerna, BCA, Telkom, Unilever, BRI, Astra International, Bank Mandiri, Gudang Garam, BNI.