Wednesday, July 16, 2008

Listing ADARO naik 57% in first day

Indonesia`s biggest listing debut seen overshadowed by weak global market


Jakarta (ANTARA News) - The debut of PT Adaro Energy Tbk on the Indonesian stock exchange on Wednesday is expected to be overshadowed by a weak global equity market amid fresh concerns about continuing fallout from the U.S. subprime crisis, analysts said.

But they are still hoping the stock would outperform the market.

Over the past two days, the Jakarta benchmark composite index has dropped 2.7 percent.

"I think the market response will be positive. As we have seen when the broad market was under selling pressure, stocks of coal producers have been able to sustain their prices at relatively high levels," said Jusuf Ade Winoto, an analyst at DBS Vickers Securities Indonesia.

Investors should buy shares of coal companies with a view to their 2009 earnings prospects rather than this year's forecast earnings, as next year will better reflect the impact of the current strength in coal prices, he said.

"Assuming production will be flat, all coal companies will still report very strong earnings growth next year. That should also happen to Adaro," he said.

Ari Pitoyo, an analyst at Mandiri Securities, said valuation-wise using the 2009 earnings forecast from the underwriter PT Danatama Makmur, Adaro's IPO is priced at par with competitors such as Bayan Resources or the country's biggest coal miner Bumi Resources.

Therefore, there is an upside for Adaro although it would be limited as investors have other options to choose from, he said.

The broader market sentiment will also weigh on Adaro.

Biggest IPO

Adaro raised about $1.3 billion in proceeds from the initial public offering, the biggest-ever IPO in Indonesian stock market history.

"In terms of the size of proceeds, it is the biggest IPO ever. But in terms of share distribution, it is probably not the case," an analyst who asked not to be named said.

Danatama has said that the IPO was five times oversubscribed. About 75 percent of the shares were allocated to foreign investors, with the remainder going to domestic investors.

Most of those shares have been allocated to a number of parties connected with the company, including five firms who hold stakes in Adaro's coal mining unit, PT Adaro Indonesia, the country's second-largest coal producer by volume.

Around 84 percent of the allotment for domestic investors -- translating to 2.6 trillion rupiah ($284.1 million) -- went to institutional shareholders including mutual funds, asset management groups and insurance and pension funds, the underwriter said.

Adaro has said in a document that 69.15 percent of the 11.14 billion shares offered would be allocated to five investors who already had stakes in PT Adaro Indonesia, a coal miner that Adaro Energy plans to acquire with the proceeds from the IPO.

They are Farallon Capital, Kerry Coal, the Government of Singapore Investment Corp (GIC), Citigroup and Goldman Sachs.

Danatama said allotments for retail investors were only 4.01 percent of the total share offering.

Adaro Energy has said it plans to use nearly 97 percent of the IPO proceeds to buy five affiliated firms: Adaro Indonesia, Coaltrade Services International, PT Saptaindra Sejati, PT Indonesia Bulk Terminal, and PT Makmur Sejahtera Wisesa.

Despite getting some flak on the share allotment for retail investors, Vicky Gandasaputra, vice president of PT Danatama Makmur, told Thomson Financial that he is not worried about the listing debut.

"At the end of the day, people will be going back to the basics, meaning that the value driver is the fundamentals. So we are talking about a (bullish) coal market," he said.

He said the fact that the coal price has gone up from $130-150 per tonne during the book building to around $190 currently would be a positive catalyst for trading in Adaro

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