Finance Asia reported that Indonesia's fifth largest coal producer Berau Coal Energy will kick off an international road show for its initial public offering this week after starting to take orders from domestic investors on July 21st 2010.
As per report, the company is aiming to raise between IDR 900 billion and IDR 1.2 trillion, which is significantly smaller than the USD 300 million talked about earlier. The reduction comes after the company has raised more money than planned through the sale of high yield bonds and a bank loan over the past month, but the deal has also been sized to correspond with the level of real demand, particularly from Indonesia, that the book runners feel exists based on feedback from the pre marketing process.
According to sources, there has been good demand from domestic institutions since the launch last week, while international interest is more questionable, given the drop in commodity prices in recent months amid lingering concerns about growth in China. As a major consumer and importer of various resources, including coal, a slowdown in the Chinese economy would have spill-over effects globally. There are also already a number of listed Indonesian coal producers to choose from, and as Berau is being offered at a valuation that is largely in line with its main competitors, the company will have to convince investors that this is justified. And they will have to do it during a period when many international fund managers are taking their summer holidays.
Berau Coal Energy is planning to prioritize Asia during the international road show in Hong Kong and Singapore, but may also visit London and New York with the idea of capturing some of the specialist mining funds that reside there. The domestic book building will end on July 29th 2010, while international investors can continue to submit orders until August 3rd 2010, when the final price will be determined. The trading debut is scheduled for August 19th 2010.
Having initially planned to sell 7 billion new shares in the IPO, as per an earlier stock exchange filing, Berau is now offering just 3 billion shares, or about 10% of its enlarged share capital. The price has been set at IDR 300 to IDR 400 per share, which equals about 9 to 11 times the company's projected earnings for 2011, based on forecasts by the international book runners.
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