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NEWS UPDATES Asean Affairs        24  March 2011

Indo ministry pushing IPOs

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Despite sluggish market sentiment and two contentious initial public offerings recently, the State Enterprises Ministry is still pushing two more state firms to go public this year.

State Enterprises Minister Mustafa Abubakar said on Wednesday that the ministry was encouraging airport operator Angkasa Pura II and seaport operator Pelindo II to list before the end of this year.

"We have asked AP II and Pelindo II to prepare their plans to go public. Once they finish their plans, we will submit them to the finance minister and the privatization committee," he said.

Angkasa Pura II manages 12 airports, including Soekarno-Hatta International Airport. Pelindo II manages 12 seaports, including Tanjung Priok in North Jakarta, the busiest in the country.

Mustafa pointed to the strong performance of other state companies, including Bank Mandiri, which went public in July 2003.

Mandiri's shares, which were priced at Rp 675 (8 cents) for the initial public offering, traded at Rp 6,000 on the Indonesia Stock Exchange (IDX) on Wednesday. Its net profit, which was Rp 604 billion in 2005, reached Rp 6.4 trillion through September last year.

"As you can see, companies like Bank Mandiri, Bank BNI and Krakatau Steel are all performing strongly after they carried out their IPOs," Mustafa said.

The minister did not elaborate on details about the prospective IPOs, including the size of the share offers and the time frame. He only said the equity being sold in each firm would be "no more than 40 percent. It will all depend on their expansion plans. AP II is expanding Soekarno-Hatta airport, while Pelindo is expanding the Tanjung Priok port."

Mustafa also said the IPOs were important as they would help fund national infrastructure and connectivity.

"The country is taking infrastructure matters seriously. State companies play an important role in improving infrastructure under the country's economic corridor development. That's why we're pushing these companies to immediately expand," he said.

He previously said the ministry was set to sell stakes, either through IPOs or strategic sales, in seven to 10 state firms this year. He pointed out state cement maker Semen Baturaja, which hopes to expand by raising about Rp 1 trillion by selling 30 percent of its equity, as a candidate.

Recent IPOs by state firms have not been smooth. Krakatau's November offering was hit by reports that shares were kept low as a favor to lawmakers. Garuda Indonesia's shares have fallen 29 percent since debuting last month, after Mustafa had argued that the initial share price was too low .

Chandra Pasaribu, head of equity research at Danareksa Sekuritas, said there was no significant difference in investors' appetite between IPOs for state companies and private companies.

"Even though the track record of most state companies is OK after they list, it all comes down to pricing, size, value, timing and their fundamentals. Garuda is one of the example of a state IPO that was not successful," he said.

Chandra also said the companies enjoyed a near-monopoly that could lure investors.

Angkasa Pura II's net profit rose 6.8 percent to Rp 1.26 trillion last year despite five of its airports losing money. Pelindo II said its pre-tax profit was Rp 740 billion last year.

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