World’s third-largest IPO this year declines in Jakarta debut

Jakarta: PT Pertamina Geothermal Energy slumped in Jakarta during its trading debut after a 9.06 trillion rupiah ($596 million) initial public offering, Indonesia’s largest over the past year.

Shares fell as much as 6.9 per cent to trade at 815 rupiah on Friday. A 25 per cent stake in the company floated after 10.35 billion shares were sold at 875 rupiah each, within the lower band of the offered range.

Such first-day decline does not bode well for upcoming listings planned by the government this year. The firm is the geothermal unit of energy company PT Pertamina, and the first of a series of mid-to-large size offerings by state-owned firms lined up for 2023.

“Overall, on the positive side, Pertamina Geothermal has long-term dollar denominated contracts in place and has little margin fluctuations which provides stability for future earnings,” said Sumeet Singh, head of equity research, IPOs and placements at Aequitas Research Pvt who publishes on Smartkarma.

“However, it also lacks growth, which makes it almost like buying a government bond and hence, we wouldn’t be willing to buy it at an earnings yield which is much ahead of the 10-year risk free rate,” Singh said.

Southeast Asia’s largest economy is selling stakes in state-controlled firms to raise funds while reducing their reliance on the state budget. The IPO is the second-largest in Asia since the start of 2023 and the third-largest in the world.

Deputy State-owned Enterprises Minister Pahala Mansury declined to comment on Geothermal’s share price and pointed out the company’s strong fundamentals.

The IPO attracted major investors including UAE’s main renewable energy company Masdar, according to a company statement Friday.

Before Geothermal’s debut, only 29 per cent of the 21 companies that listed in Jakarta over the past decade after raising over $100 million finished their debut session lower than the listing price, according to data compiled by Bloomberg. The average decline for those firms in their inaugural day was 8.6 per cent.

PT Garuda Indonesia Persero Tbk, the flag carrier that began trading in 2011 following a $524 million IPO, slumped 17 per cent in its first session. In contrast, state controlled PT Waskita Beton Precast jumped 10 per cent in September 2016 debut after its $395 million IPO.

Solid pipeline

Pertamina Geothermal’s IPO is the largest in Jakarta since GoTo Group’s $959 million listing in April 2022. The strong lineup of deals in the Indonesian capital this year is in contrast with a slow start in Asian hubs such as Hong Kong, Seoul and Singapore.

PT Pertamina Hulu Energi, the upstream unit of Pertamina, and plantation firm PalmCo. are next to go public this year.

Prior to Friday’s debut by the Geothermal company, only four alternative-energy firms sold shares though IPOs in Indonesia since 2013, raising combined proceeds of about $40 million, the data show.

PT CLSA Sekuritas Indonesia, Credit Suisse Group AG and PT Mandiri Sekuritas were the arrangers of the IPO.