Euroweek Equity roundup, September 3

Euroweek, Equity Capital Markets roundup, September 3 2010

Indonesia

Indonesia continues to be one of the most vibrant markets for equity issuance in Asia. This week a placement raised almost US$400 million, roadshows commenced on two of the biggest IPOs in months, and several other major deals inched closer to launch.

The biggest completed deal was a placement of 98.5 million shares in the Indonesian coal mining group Indo Tambangraya Megah by its parent, Banpu Minerals. The deal, priced at the bottom of a Rp36,150-38,500 range, raised a total of Rp3.56 trillion (US$396 million). The sale price was an 8% discount to the September 1 closing price and the deal was placed to institutions immediately after the close.

Goldman Sachs was international bookrunner on the deal, while Bahana, Danareksa and Mandiri shared domestic roles. The stake was equivalent to 8.72% of ITM and reduces Banpu’s stake to 65%.

Also this week Indofood Consumer Branded Products began the roadshow for its global IPO, highlighted in a previous edition of Euroweek. With a guidance range of Rp4,300 to Rp5,500 per share, and with 1.166 billion shares on offer, the deal could raise as much as Rp6.41 trillion at the top of the range, equivalent to US$708 million.

Credit Suisse and Deutsche Bank are joint global coordinators and bookrunners, alongside Kim Eng as a domestic underwriter, on a deal scheduled to price on September 17 for an October 7 listing.

Indofood CBP is being spun off from Indofood Sukses Makmur, one of Asia’s largest packaged food businesses and a key Indonesian blue chip. It can expect a favourable reception as a domestic consumption play in one of Asia’s most buoyant economies. The spun-off group includes the production and marketing of Indofood’s noodles and various other branded foodstuffs, and in previous years has accounted for a majority of the overall company’s profits. The float is expected to put 20% of the Indofood CBP division on the market.

Elsewhere, Harum Energy, an Indonesian coal miner, kicked off its own IPO process yesterday. A full roadshow will follow next week, with a retail offer from September 28 to September 30, and listing on the Indonesian Stock Exchange on October 6, the day before Indofood CBP. “The two are running in tandem,” says a banker familiar with the deals.

The price range is Rp5,000 to 6,300 per share, with a maximum issue size of 650 million shares, or 24% of the enlarged share capital (not 715 million as has been reported elsewhere). That suggests a maximum deal size of Rp4.1 trillion, or $455 million. The coal miner is owned by Tanito Coal Group and will use the proceeds to acquire stakes in smaller coal companies in Kalimantan, and to strengthen its working capital and pay down debt.  

Deutsche Bank is also on this deal, alongside Goldman Sachs as joint international bookrunners; Ciptadana and Mandiri are domestic underwriters. Also in the pipeline is another miner, Newmont Nusa Tenggara, whose IPO is also expected to raise around US$500 million, with UBS and BNP Paribas leading the deal. This may not be listed before the end of the year, however.

When they finally reach the finish line, the biggest deals will likely dwarf any of the other transactions this year. The listings or Krakatau Steel and Garuda Indonesia, the airline, are considered key trophy deals in Indonesia’s privatization process, and while both have suffered delays, those close to the ministry continue to say fourth quarter listings are feasible. Krakatau Steel may roadshow as soon as this month, and a beauty parade for the international role on the Garuda listing took place on Tuesday. It is understood that the international managers have been decided upon but not announced, but that Danareksa, Mandiri and Bahana will handle the local underwriting roles.

On top of that is a mooted rights issue by Bank Mandiri which has been reported as potentially raising as much as US$1.6 billion. If that turns out to be true, it will be the largest rights issue ever by an Indonesian state-backed company, although most market talk is somewhat lower. A further rights issue is in the works from Bank Negara Indonesia, expected to raise as much as US$1.1 billion, although both these rights issues will require parliamentary approval before going ahead. “All of these deals will come,” says a banker in Jakarta, “though I’m not sure everything will come this year.”

Indonesia’s dominance of the markets continues a trend evident in the first half of the year, when more equity was raised there than in Singapore or anywhere else in Southeast Asia. Recent major deals have included Berau Coal, which raised Rp1.36 trillion, or US$152 million.

Indonesia is back in the good books of international fund managers through a combination of things: a strong economy, political stability, robust currency, and a stock market that has delivered 21.6% year to date and 32.4% over the last 12 months, ahead of every other Asian market bar Thailand’s post-protest bounce. [NB That’s as of the Tuesday close, most up-to-date number I could get]

“Companies and shareholders are taking a view that this is a good time to take money off the table, a good time to repay debt,” says a banker in Jakarta. “We’ve seen a bout of exuberance in Indonesia and this time I think it is more durable than on previous occasions when it has come unstuck. Indonesia has a public debt to GDP ratio of 29% now; in Brazil it’s 66% and not so long ago it was 100% here. The fiscal discipline has been great.” The economic story has been reflected not only in stock market performance but continuous net inflows of foreign funds on both the debt and equity side, with bankers estimating foreigners now account for about 30 to 35% of total market capitalization.

SAS

Sino-American Silicon Products, the Taiwanese wafer manufacturer, was on track to raise as much as US$181 million overnight through a global depositary receipt issue.

Nomura, the sole bookrunner, was leading the sale of 61 million Luxembourg-listed GDRs at price guidance of NT$93 to NT$95 per share, representing an 8.1-10% discount to the average of the three consecutive closes ending September 1. Pricing was not expected until midnight Taiwan time, but by mid-afternoon it was understood the deal had been oversubscribed for the full size (they had originally set out to sell between 48 million and 61 million GDRs, but it appears the full amount will be allotted).

SAS produces wafers and ingots that are used in solar cells, among other things. It is listed on Taiwan’s GreTai market rather than the main board, and has mainly been held by domestic investors, which is part of the reason for the GDR issue in order to diversify the shareholder mix. Unlike the last significant GDR from Taiwan – by Wintek, which raised US$122 million in April, through an accelerated bookbuild – this issue followed a roadshow in Asia and Europe.

Each GDR is equivalent to one share and the issue is backed by new primary securities, representing 19% of existing share capital. The proceeds will be use to buy machinery and materials or to service bank debt.

BRIEFS

Gujarat Pipavav Port, an Indian container and bulk cargo port operator, completed a RS5.08 billion (US$107 million) IPO on India’s National Stock Exchange. The deal included both institutional and non-institutional support, with Goldman Sachs, the Singapore government, Credit Suisse Singapore, Tata, HDFC and DSP Blackrock among the anchor investors. A chunk set aside for high net worth individuals – described as “non-institutional investors” – was reported to be more than 80 times covered. Kotak Mahindra Capital and IDFC Capital were joint bookrunners.

Fortis Healthcare, the Indian hospital group, is believed to be planning a listing on Singapore Exchange. Fortis did not respond to queries from Euroweek before press time but has been reported as hiring Religare Capital Markets as an advisor ahead of appointing an arranger for a potentially US$1 billion deal.

SITC International, a Chinese shipping and logistics company, is pre-marketing an IPO of 650 million shares which could raise as much as US$500 million, and potentially more if an up to 15% greenshoe is exercised. Citigroup is global coordinator of the deal and shares joint bookrunner roles with CICC. Roadshows are expected on the week beginning September 13.

China Sanjiang Fine Chemicals is pre-marketing a Hong Kong IPO which could raise US$100 million through BoCom International and Daiwa. Pricing is expected on September 9.

UBS is leading a Hong Kong IPO for China Medica System, a pharmaceutical group already listed on AIM. Roadshows start next week and pricing is expected on September 20. Other companies with Hong Kong IPOs underway include Mongolian Mining, through Citigroup and JP Morgan; Trony Solar, through CLSA, JP Morgan and ICBC; China Power Electronics, through Deutsche; and Magic Holdings, through BOC International.