IPO News Indonesia: Waskita Toll Road to List in 2017?
Indonesian state-controlled contractor Waskita Karya is also eager to see its subsidiary Waskita Toll Road conducting an initial public offering on the Indonesia Stock Exchange. On Tuesday (20/09) another unit of Waskita Karya - Waskita Beton Precast - was listed on the local bourse, raising IDR 5.16 trillion (approx. USD $394 million) hence becoming the biggest IPO in Indonesia so far this year. This year there have been few companies eager to list considering the highly volatile markets amid the weak global economy and ahead of another Fed Fund Rate hike.
Muhammad Choliq, President Director of Waskita Karya, said the IPO of Waskita Toll Road, which is possibly to occur in 2017, is estimated to raise more funds compared to the IDR 5.16 trillion that was generated through the IPO of Waskita Beton Precast. However, the amount of shares that will be offered to the public remains unknown. In fact, the company will first try to find strategic investors for divestment of part of its stake in Waskita Toll Road. Choliq informed that there are up to four companies that are interested to buy stakes in Waskita Toll Road.
This divestment aims at adding equity - preferably around IDR 3 trillion - to the toll road developer before conducting the IPO. Waskita Toll Road also needs the funds to handle a targeted 1,000 kilometers of toll road concessions by 2018. Currently, the company already has concessions for 15 toll roads covering 750 kilometers in length. As such, it still needs to add 250 kilometers in the next two years. With higher equity it will be easier for the company to obtain loans to finance its expansion plans as its financial ratios will become healthier.
IPO Waskita Beton Precast on the Indonesia Stock Exchange
On Tuesday (20/09) Waskita Beton Precast became the 11th company to be added to the Indonesia Stock Exchange in 2016. Its shares surged 10.2 percent on its trading debut to close at IDR 540 per share. Investors were eager to invest in the company as its corporate earnings will surely get a boost from the government's push for infrastructure development. Moreover, given that its parent company - Waskita Karya - is a state-controlled firm, the company is in a great position (close to the government) to benefit directly from the government-led infrastructure projects. About 85 percent of Waskita Beton Precast's sales come from its parent company Waskita Karya. Its IPO was oversubscribed at least three times, reflecting investor appetite and confidence.
Jarot Subana, President Director of Waskita Beton Precast, said the company allocated up to IDR 4 trillion (approx. USD $304 million) for capital expenditure (capex) to expand business outside the island of Java (up to 2018). For this year it prepared IDR 1.1 trillion of capex, while it prepared IDR 1.9 trillion and IDR 1 trillion for 2017 and 2018, respectively.
Subana added that IDR 650 billion of the funds that were generated through the IPO are to be used to develop two factories that are currently being constructed in Palembang (South Sumatra) and Klaten (Central Java). After completion the company will have a total of 10 factories. By 2018 the company wants to have added another three factories (in East Kalimantan, South Sulawesi and North Sumatra), thereby reducing the proportion of sales generated on the island of Java from 70 percent to 60 percent.
These additional factories are expected to raise the company's annual installed production capacity to 2.65 million tons by December 2016 and to 3.8 million tons in 2018, from 2.3 million tons produced by the eight existing plants currently.
Waskita Beton Precast already secured IDR 7 trillion in new contracts this year, approaching the IDR 7.6 trillion target that was set at the start of the year. Therefore the board is convinced that the target will be achieved. In fact, new contracts are expected to reach IDR 8 trillion by the year-end, while profits after tax is estimated to touch IDR 620 billion in 2016.
Waskita Beton Precast controls about 39 percent of the domestic precast concrete market of Indonesia, just behind market leader Wijaya Karya Beton, subsidiary of another state-owned construction company Wijaya Karya, that had gone public earlier (and controls a 42 percent market share in Indonesia's precast concrete market).
There are now more than 500,000 investors active on the Indonesia Stock Exchange (IDX). Based on the single investor identification (SID) system, which gives a unique number to all individual and institutional investor, there are 487,713 retail investors (which is an individual investor who buys and sells securities for their personal account) and 12,324 institutional investors. The number of listed companies on the IDX has risen to 533.