IPO pricing of its Indonesian unit seen as main cause
By FELDA CHAY
THE bloodletting would not stop for Indofood Agri Resources. Yesterday, shares of the Singapore-listed company tumbled 15.7 per cent to an 18-month low, largely in reaction to the palm plantation group's Friday announcement that it had priced the Indonesia initial public offering of subsidiary PT Salim Ivomas Pratama (SIMP) at 1,100 rupiah a share.
The offer price per share is at the lower end of the 1,060-1,700 rupiah indicative price range. Since announcing palm oil producer SIMP's listing on Feb 18 this year, IndoAgri's shares have plunged from $2.46 to yesterday's $1.72.
Yesterday alone saw a 32-cent dive after about 83 million shares changed hands, making it the third-most actively traded stock. Not helping the situation was the regional market fall, which in Singapore saw the Straits Times Index dropping by 1.8 per cent.
According to JP Morgan, its calculations show that 'the PT SIMP IPO is valuing IndoAgri at just $1.41 per share', a 30.9 per cent discount to its Thursday close before factoring in any upcoming mergers and acquisitions, and any holding company discount. Trading of IndoAgri's shares was halted on Friday.
The US$408 million in proceeds that will be raised from the offering would just be sufficient for SIMP's planned debt repayment of US$200 million, and capital expenditure of around US$200 million, said JP Morgan.
After the IPO, IndoAgri's stake in SIMP will decline to 72 per cent from 90 per cent.
In a report, Goldman Sachs noted that 'the IPO could pose downside risks to our IFAR (IndoAgri) earnings estimates through potential EPS (earnings per share) dilution, as well as possible holding company discount once its main operating asset is listed separately'.
It believes that IndoAgri's 2011 earnings per share could be diluted by 12 per cent.
Last month, IndoAgri said that net profit for its first quarter rose to 514.3 billion rupiah (S$73.6 million) - 66 per cent higher than the 309.8 billion rupiah it earned a year ago.
The rise, which came on the back of higher selling prices and sales volumes for palm products, took earnings per share for the three months ended March 31 to 5.1 cents, up from 3.1 cents a year earlier.
Revenue was up 38.6 per cent to 2.93 trillion rupiah, from 2.1 trillion rupiah last year.
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