Reportedly, Garuda Maintenance Facility AeroAsia (GMF AeroAsia), the aircraft maintenance and repair unit of Indonesia's national flag carrier Garuda Indonesia, raised only IDR 1.27 trillion (approx. USD $95 million) from its initial public offering (IPO) on the Indonesia Stock Exchange.
This figure is significantly below GMF AeroAsia's initial target of raising up to IDR 5.5 trillion (which would have made it the biggest IPO in Indonesia so far in 2017). Four securities companies were appointed as underwriters: Bahana Sekuritas, BNI Sekuritas, Danareksa Sekuritas, and Mandiri Sekuritas (lead underwriter).
According to a Thomson Reuters report, citing two people with knowledge of the matter, GMF AeroAsia decided not sell a 30 percent stake but only a 10 percent stake in the IPO. Meanwhile, the company priced the IPO at a modest IDR 400 per share, close to the bottom end of its earlier indicated IDR 390 - IDR 510 price range.
Previously, GMF AeroAsia considered to sell a 30 percent stake: 20 percent to the public and 10 percent to one - or more - strategic investors. Whether this 10 percent (or higher/lower) stake will still be offered to strategic investors is unclear.
Demand for GMF AeroAsia's IPO was weak as the global aircraft maintenance and repair market is suffering from overcapacity and rate pressure, while GMF AeroAsia is too dependent on parent company Garuda Indonesia for its revenue. Currently, about 65 percent of GMF AeroAsia's revenue stems from Garuda Indonesia, while the remainder comes from other airlines. Although GMF AeroAsia targets to reverse this ratio within the next five years, it may be a too ambitious target. Meanwhile, Garuda Indonesia struggles to post net profits in recent years.
The small size of GMF AeroAsia's IPO makes it unattractive to foreign investors who may be concerned about the stocks' future trading liquidity.
Last week, Iwan Joeniarto, Chief Executive of GMF AeroAsia, said 60 percent of the funds that are generated through the IPO will be used by the company to establish a new unit on Batam island near Singapore as well as for overseas expansion (particularly in Dubai, Australia, and East Asia). Meanwhile, 25 percent of proceeds will be used as working capital, while the remainder is set to be used to refinance the company's debt.
In recent years, there were few IPOs on the Indonesia Stock Exchange as the global economy was - and remains - plagued by a high degree of uncertainty (especially related to monetary policies in the world's biggest economic forces), while massive inflows into Indonesia amid accommodative monetary policies of the USA and European Union have led to high valuations of Indonesian stocks.
This year, however, Indonesia's IPO market is rebounding. So far in 2017 a total of 22 companies have been added to the Indonesia Stock Exchange as local companies are less concerned about global uncertainties, while Indonesia's economic and financial conditions are stable (reflected by Indonesia's credit rating upgrade - to investment grade - by credit rating agency Standard & Poor's in mid-May 2017.
"GMF AeroAsia will issue an official statement regarding the GMF IPO after obtaining an effective statement from Indonesia Financial Services Authority (OJK - Otoritas Jasa Keuangan)", says M. Arif Faisal, VP Corporate Secretary at PT GMF AeroAsia.