Industry Profie: Capital Market in Indonesia

MARKET INTELLIGENCE REPORT ON

INDONESIA'S CAPITAL MARKET STRUGGLING AMID GLOBAL CRISIS

May 2009

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IPO 2008 valued at Rp24.39 trillion

In 2008, there were 18 companies launching IPO at BEI raising Rp24.39 trillion in fresh fund. Among major issuers were PT Bank Ekonomi Raharja Tbk and PT. Tabungan Pensiun Nasional Tbk, PT. Adaro Energy Tbk , PT. Bayan Resources Tbk and PT. Indika Energy Tbk.

Altogether, fresh fund raised by listed companies from share sales in 2008 totaled Rp82.45trillion including Rp24.39 trillion from IPO, Rp56.08 trillion from rights issue and Rp1.98 trillion from warrant issues. The total amount was much higher than Rp29.35 trillion in 2007. The surge in the amount was attributable mainly to IPO by PT Adaro Energy Tbk and rights issue by PT Bakrie & Brothers Tbk.

Bank Ekonomi Raharja Tbk (BER) of the Wings Group, launched IPO offering 270 million shares or 10.11% of its shares at a price of Rp1,080 per share with underwriter PT Dinamika Usahajaya . The bank earned Rp291.6 billion from the share sales.

The bank used 70% of the fund to strengthen its lending capacity for small and medium enterprises, 15% to finance expansion of operational network and another 15% to finance development of information technology and human resources.

After the IPO, the composition of its shareholders consists of Hendrik Tanojo (2.21%), Teddy Jeffrey Katuari (3.78%), Hanny Sutanto (4.01%), Finney Henry Katuari (2.45%), PT Lumbung Artakencana (38.84%), PT Alas Pusaka (38.60%) and investing public (10.11%). By August 31, 2007 , the assets of the bank were valued at Rp15.051 trillion with net profit at Rp124.946 billion.

PT Adaro Energy Tbk launched IPO selling 31.7% of its share to the public and raised Rp12.252 trillion in fresh fund. PT Danatama Makmur was named as the underwriters (Lead Managing Underwriter) and UBS, Morgan Stanley and DBS as International Placement Agents.

Adaro Energy and its subsidiaries make up the country's largest integrated coal companies with business in coal production, coal trade, mining service , coal infrastructure service and logistic services.

Adaro Energy through Adaro Indonesia, is the largest operator of surface open cut coal mine in the world. Its coal mines is located in South Kalimantan with concession to last until 2022.

Its proven reserves are estimated to reach 876 million tons, with resources estimated at 2,803 million tons. Over a concession of 34,940 hectares . Currently its production capacity is 40 million tons per year and plans to expand the production capacity to 80 million tons in the next 5 years.

Bayan Resources through IPO sold 31.6% of its shares and raised Rp8.1 trillion in fresh fund . In 2007 its coal sales totaled 7.1 million tons at prices higher than the average price of US$ 51 per ton to reach US$ 362 million. Its coal production in 2008 totaled 4.7 million tons. In 2008 its coal production reached 9 million tons and sales at 9.9 million tons . With selling prices averaging US$ 76-US$80 per ton the company earned US$752 million -US$792 million form coal sales or an increase of 218% from the previous year.

Currently Bayan has 8 coal mines but so far only three of them are operational. They are Gunungbayan, Wahana and Perkasa Inakakerta. The five other mines - Teguh-Firman and Fajar-Taba-Brian (FTB) - are still in the phase of development and construction of infrastructure.

Around Rp800 billion to Rp1.02 trillion of funds from IPO will be used to develop the Wahana, Perkasa and FTB mines. Teguh-Firman are still in the early process of building their infrastructure. Its coal production targets in 208 included 4.5 million tons from block II of Gunungbayan, 2 million tons from Wahana , 2 million tons from Perkasa and 500,000 tons from Taba. By the end of the first quarter of 2008, its proven reserves totaled 78.7 million tons with total reserve of 476.9 million tons. Its coal resources total 1 billion tons.

PT. Indika Energy (formerly PT. Indika Inti Energy) launched IPO in June 2008 selling 937.284 million shares worth Rp2.764 trillion.

The company used the IPO fund to finance its capital expenditures and expand energy business including coal mine acquisition. The company plans to spend up to US$ 580 million in the next five years In 2007, Indika reported Rp2.337 trillion in income and Rp265 billion in net profit. .

After IPO, the shareholders of Indika included PT Indika Mitra Energi holdng 57.4%, PT Tunas Bhakti Manunggal 17.32%, Pandri Prabono-Moelyo 4.32%, Eddy Junaedy Danu 1.48%, Wadyono Suliantoro Wirjomihardjo 1.48%, and investing public 18%.

Indika was established in 2000 and became the parent company of Indika Group. It has a 46% stake in PT Kideco Jaya Agung, the country's third largest coal producer, 100% stake in the Triparta Group (PT Tripatra Engineers and Constructors and PT Tripatra Engineering).

Among the new issuers only four giving positive return to the investors. Until the end of 2008, other issuers gave negative return of 3.33% -83.79%

A report said since the first time its shares were traded until the close of the market in 2008, the shares of PT Bank Ekonomi Raharja Tbk gave the highest positive return of 106.02%. On the contrary the shares of PT Bayan Resources Tbk gave the lowest return of minus 83.79%.

The shares of PT Triwira Insanlestari Tbk, PT Kertas Basuki Rachmat Indonesia Tbk, and PT Hotel Mandarine Regency Tbk respectively gave positive returns of 50%, 32.69%, and 8.18%.

Meanwhile, the lowest market capitalization was recorded by PT Kokoh Inti Arebama Tbk with a capitalization of Rp42.50 billion and PT Verena Oto Finance Tbk with a capitalization of Rp50 billion . The shares of Bayan Resources gave a negative return because of this year performance expectation. The coal reserve of Adaro Energy are larger than that of Bayan Resources.

The few number of companies launching IPO in 2008 gave a positive return. New issuers could provide positive return with the number of shares sold, new issuers could manage to sell shares at fairly good prices as the capitalization was low.

A number of issuers get penalty in fine

A BEI rule requires all issuers to submit financial report every quarter, but not all issuers could meet the regulation on various reasons.

BEI served 15 issuers written warning with a fine of Rp50 million each for failing to submit financial report until a given deadline in the first quarter of 2009. Until June 1, 2009, there were still 24 companies , which had not submitted their financial report for the first quarter of 2009.

Among the 24 issuers, 15 companies had not submitted financial report and 8 companies to submit their audited reports and one company had different book year.

The 15 issuers punished with a fine of Rp50 million each included PT Eratex Djaja Tbk (ERTX), PT Indomobil Sukses Internasional Tbk (IMAS), PT Indah Kiat Pulp and Paper Tbk (INKP), PT Medco Energi Internasional Tbk (MEDC), PT Apac Citra Centertex Tbk (MYTX), PT Pabrik Kertas Tjiwi Kimia Tbk (TKIM), PT Alfa Retailindo Tbk (ALFA), PT Bank Century Tbk (BCIC), PT Bhuwanatala Indah Permai Tbk (BIPP), PT Sentul City Tbk (BKSL), PT Infoasia Teknologi Global Tbk (IATG), PT Leo InvestmentsTbk (ITTG), PT Mitra Rajasa Tbk (MIRA), PT Agis Tbk (TMPI), and PT Truba Alam Manunggal Engineering Tbk (TRUB)

IPO plans in 2009

With the condition improving in the market many companies plans to launch IPO in the second half of 2009, based on report received by BEI.

Optimism that the capital market will grow is indicated by the plans of many companies to launch IPO including by state companies. The shares of state companies have always attracted investors as they have larger capitalization.

In 2009, BEI is set to see 15 companies to launch IPO including 11 companies which were to launch IPO last year. BEI said 30 companies are expected to launch corporate actions launching right issue and 27 other issuing bonds this year.

BEI also hopes to record Rp2.75 trillion in daily transactions or lower than the daily transactions of Rp5.2 trillion in the first half of this year.

In 2008, BEI recorded 18 new issuers down 25% from 24 in 2007. Through declining in number of issuers, the IPO value rose 29.6% to Rp24.39 trillion from Rp17.18 trillion in 2007.

The number of companies launching rights issue in 2008 was 25 or the same as in 2007, but rose 46.8% in amount of fresh fund raised to Rp56.07 trillion from Rp29.8 trillion.

Investors have been long waiting for a number of state companies to launch IPO such as Garuda Indonesia, construction company Waskita Karya and plantation companies PT. Perkebunan Nusantara III, IV and VII as they are all large companies.

Meanwhile two large private companies PT Bumi Citra Permai and PT Source Alfaria Trijaya planned to launch IPO in January, 2009 but apparently they have failed to implement their plan as scheduled. A number of other private companies including PT Metropolitan Kencana, PT Inovisi Infracom, PT Katarina Utama, PT Profesional Telekomunikasi Indonesia (Protelindo), and PT Batavia Prosperindo Finance also plan IPO in 2009. Bank Tabungan Negara and Garuda Indonesia are to launch IPO in the last quarter of 2009.

The government has secured approval from the House of Representatives to sell part of the shares of state companies through IPO. The government plans to sell around 30% of the shares of the state companies on the average to the public.

The office of the state minister for state enterprises planned to privatize 11 BUMNs in 2008 through IPO in a bid to revitalize the companies but implementation of the plan was postponed as the condition of the market was not conducive.

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