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Bearish mood could snag Garuda IPO debut
After waiting more than two years, national flag carrier Garuda Indonesia will finally list its shares on the nation’s bourse today in the midst of the bearish mood in the local stock market
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fter waiting more than two years, national flag carrier Garuda Indonesia will finally list its shares on the nation’s bourse today in the midst of the bearish mood in the local stock market.
Analysts say Garuda’s stock market debut could be unfortunate because it would come when the market was still under selling pressure from foreign investors, the driving factor in the local market.
“With the current bearish mood, I think Garuda Indonesia’s debut will not be so promising, especially with the high IPO price it offers,” Nico Omer Jonckheere, vice president of research and analysis at the Valbury Asia Futures, told The Jakarta Post in a telephone interview.
Several analysts considered Garuda’s IPO price of Rp 750 (about 8 US cents) per share too expensive compared to its regional peers like Singapore Airlines, Malaysian Airlines and Cathay Pacific. They said the fair price for Garuda shares would be between Rp 400 and Rp 600 in order for it to attract more buyers.
“There is the possibility that Garuda share prices could slide to below Rp 500 several days after the debut. For the debut, the underwriters will try hard to maintain the price at the IPO level,” Nico said.
Satrio Utomo, Universal Broker Indonesia head of research, said with the current market condition, it would be difficult for Garuda to get a strong response from investors. “It needs lots of luck to have a ‘smooth take-off’ tomorrow. The opportunity is not that good,” he told the Post.
The benchmark Jakarta Composite Index (JCI) plummeted further by 1.28 percent Thursday to close at 3,373.64 amid selling pressure from foreign investors. The index has lost 9 percent this year, the biggest loser among Southeast Asia indexes, after a 46 percent gain last year, which made it as one of the best performers in Asia and Pacific.
Foreign investors, who controlled about 60 percent of the nation’s stock market, have sold a total Rp 3.71 trillion worth of stocks more than they bought so far this year amid fears of high inflation.
Media reports unveiled on Thursday limited orders for Garuda initial shares, which made the underwriters and selling agents buy the flag carrier’s initial shares for those which are unsold.
Danareksa Sekuritas, Mandiri Sekuritas and Bahasa Securities were the underwriters for the initial shares offer, while international selling agents include UBS AG and Citigroup Inc. “It’s the underwriters’ risk to buy unsold shares,” Satrio said.
“When Garuda pushed its IPO with a surprisingly poor nine-month financial performance last year, that’s also a problem,” he added.
Garuda booked a revised Rp 150 billion net profit as of September last year, after saying that it posted Rp 39.5 billion loss in the period. The firm has targeted full-year net profits of Rp 1 trillion in 2010.
Garuda shares were set at the bottom-end of the initial range of Rp 750 to Rp 1,100 and the offering was also downsized to 5.73 billion instead of the planned 9.36 billion, with State-Owned Enterprises Minister Mustafa Abubakar saying he “did not want to see Garuda suffer [potential] losses from the current [bearish] market situation”.
Finance Minister Agus Martowardojo said he saw large potential buyers for Garuda shares in the domestic market, in line with media reports that said demand for Garuda shares came mostly from domestic investors.
The stock index lost 1.36 percent, or 46 points, one day ahead of Garuda’s initial listing, sliding back to the 3,300 mark at 3,373 despite Rp 519 billion of foreign investors net buy during the day.
