SALIM Ivomas Pratama (SIMP) IPO - hardly attractive

The IPO for SALIM Ivomas Pratama (SIMP), a subsidiary of IndoAgri may be the biggest Indonesian listing so far, but it will be hardly attractive.

Firstly, the offering price of between Rp 1,060 and Rp 1,700 is said to be very expensive.

Secondly, most of the IPO proceed (40% in fact) shall be used to reduce debt?!?!

No way will I give this IPO a chance.

SALIM Ivomas Pratama (SIMP), a subsidiary of Singapore-listed Indofood Agri Resources (IndoAgri), could raise as much as $768 million in its June initial public offering (IPO), making it the biggest Indonesian listing so far this year.

SIMP, a cooking oil and fats manufacturer in Indonesia, said in a statement yesterday that it plans to issue up to 3.16 billion new ordinary shares in its global offering. These shares have a par value of 200 rupiah (S$0.03) apiece, and represent a maximum of 20 per cent of the post-IPO enlarged and fully paid-up capital of the company.

IndoAgri's shareholders had earlier given their approval for the firm's stake in SIMP to be diluted by up to 20 per cent for the offer, depite concerns over the palm plantation owner's shareholding interest dilution.

There were also worries that SIMP's listing would lead investors to lose interest in IndoAgri as an entry point into the agricultural sector.

IndoAgri, which owns 90 per cent of SIMP, has seen its share price fall 17.1 per cent from $2.46 since it announced plans for the listing on Feb 18.

Yesterday, its shares fell 0.5 per cent to $2.04, after a trading halt that was imposed for the first half of the day was lifted following the announcement. The stock traded between $2.01 and $2.06 yesterday.

SIMP gave a target indicative price range of 1,060 rupiah (S$0.15) to 1,700 rupiah per share for the offer. This means that SIMP will raise a minimum of $479 million. The indicative price range is, however, subject to revision.

SIMP said that half of the net proceeds will be used for the group's new planting and replanting programmes for oil palms and sugar cane, and construction of processing mills and supportive infrastructure over a five-year period.

About 10 per cent of net proceeds will be used to build production facilities for its edible oil and fats division, and purchase vessels for crude palm oil transportation. The remaining 40 per cent will be used to reduce its debt, said SIMP.

The group's expansion plans include the construction of palm oil processing mills in Indonesia's West Kalimantan and South Sumatra, which are currently being built.

It is also planning to expand its sugar cane plantation in South Sumatra. To meet higher processing demands from the anticipated increase in sugar cane production, SIMP is also in the process of completing the construction of a sugar mill this year.

Kim Eng Securities, Deutsche Securities Indonesia and Mandiri Sekuritas are joint lead underwriters for the IPO. The offer period will be from May 30 to June 1.

From Business Times, "IndoAgri unit IPO may raise up to $768m".

PT Salim Ivomas Pratama (SIMP), the agribusiness unit of Singapore-listed Indofood Agri Resources Ltd, expects to raise up to Rp 5.3 trillion (US$619 million) from the company’s initial public offering scheduled for next month.

SIMP vice president director Paulus Moleonoto said in Jakarta on Tuesday that the company would offer 3.16 billion new shares, or about 20 percent of the company’s enlarged capital, in the IPO, which is set to be the largest IPO this year.

He said shares would be sold to the public from May 31 to June 1 at an indicative price of between Rp 1,060 and Rp 1,700 per share.

If the upper price indication is realized, the company would book Rp 5.3 trillion, which would make it the largest IPO so far this year. Indonesian national flag carrier Garuda Indonesia raised Rp 3.3 trillion in its IPO in January, making it the largest new listing so far this year.

Paulus said SIMP had begun carrying out publicity campaigns on its IPO, including an overseas road show in the US, the UK, Singapore and Hong Kong next week.

He said the IPO offering period would end June 1, while the allotment would be held on June 6. The shares will be officially listed on the Indonesian Stock Exchange (IDX) on June 9.

SIMP has appointed PT Deutsche Securities Indonesia, PT Mandiri Sekuritas and Kim Eng Securities as IPO underwriters.

Investors said an offering price of between Rp 1,060 and Rp 1,700 would be very expensive. However, underwriters said shares would be priced in the same range as similar companies listed on the stock market.

Mandiri Sekuritas investment director Iman Rahman said that with a price-to-earnings ratio of 10 to 16, SIMP’s share price wouldn’t be expensive.

SIMP’s businesses comprise oil palm, rubber and sugar cane plantations and palm oil downstream industry in Sumatra and Kalimantan. The company also produces cooking oil.

SIMP said that as of March this year, it operated 29 crude palm oil refineries in Sumatra and Kalimantan with a combined capacity of 4.6 million tons a year. In a statement, the company said 40 percent of the IPO proceeds would be used to pay off debt to local and foreign banks, 50 percent would be allocated to fund the expansion of its plantation division, and the remaining 10 percent to fund its palm oil division.

The company, with total assets of Rp 21.78 trillion as of March this year, recorded total sales of Rp 2.92 trillion during the first quarter, up from Rp 2.11 trillion. Its operating profit rose to Rp 945.46 billion in the first quarter, increasing sharply from Rp 465.94 billion in the same period last year.

From Jakarta Post, "Ivomas set for RI’s biggest IPO this year".

Salim Ivomas Pratama (SIMP) - 90 per cent owned by Singapore-listed palm oil giant Indofood Agri Resources - plans what could be Indonesia's biggest share sale this year, joining firms such as Switzerland's Glencore that have tapped investors keen to ride the global boom in commodity prices.

SIMP is seeking to raise as much as 5.37 trillion rupiah (S$774 million) in the initial public offering by selling 3.16 billion new shares. The IPO is planned for the second quarter of this year and SIMP has set an indicative price range of 1,060 to 1,700 rupiah per share, its parent said yesterday.

According to its prospectus, SIMP plans to use 40 per cent of the IPO proceeds to reduce debt, 50 per cent towards capital expenditure at its plantation division and 10 per cent to help develop a production facility for its edible oils and fats division.

Last year, the company reported net profit of 970.98 billion rupiah, down from 1.01 trillion rupiah a year earlier, while its assets as of Dec 31 totalled 21.06 trillion rupiah, compared with 18.31 trillion rupiah a year earlier.

From Today, "Indofood Agri unit plans Indon's largest IPO this year".


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