Property developer gains near 70 percent on trade debut

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Property developer PT Gading Development (GAMA) saw its shares rise nearly 70 percent during its debut on the Indonesia Stock Exchange (IDX) on Wednesday.

The GAMA share price jumped to Rp 150 (US1.59 cents) from its initial public offering (IPO) price of Rp 105 just a few minutes after the shares began trading on the exchange. The share price reached its peak at Rp 153 before closing the morning trading session at Rp 146, 39 percent higher than its IPO price.

GAMA continued to climb in the second session of trading, and closed at Rp 178, a 69.52 percent
increase from the IPO price.

Meanwhile, the Jakarta Composite Index rose slightly to close at 4,009.68 during morning trade. The index ended the day to close at 4,019.13, a 0.24 percent increase compared to the closing price a day earlier.

Gading, the 12th company to float shares on the bourse this year, raised Rp 420 billion from its IPO last week. The company sold 4 billion shares, or about 39.98 percent of its enlarged capital. After the IPO, 36.01 percent of Gading is owned by PT Gading Investment, 24.01 percent by PT Multi Daya and the remainder by the investing public.

Gading also offered 2 billion warrants with a ratio of two shares for one warrant priced at Rp 105. The warrant will mature in July 2015.

During its IPO, the company’s shares were oversubscribed eight times. About 60 percent of investors purchasing the shares were local retail investors, according to Andri Rukminto, the president director of PT Andalan Artha Advisindo Sekuritas, which served as the underwriter for the public offering.

Most of the funds raised from the IPO will be used to pay Gading’s debts. “We want to reduce our financial burden,” Gading president director Henry Kembaren said after his company’s listing.

According to its prospectus, the company will allocate 23.97 percent, or Rp 95.87 billion, of total funds raised from the IPO to pay its debt to Palazzo Property Holdings, 32.5 percent or Rp 130 billion to PT AB Sinar Mas Multifinance, 3.38 percent or Rp 13.52 billion to PT Bank Sinarmas and 12.5 percent or Rp 50 billion to PT Bank Capital Indonesia.

Gading will use 12.5 percent, or Rp 50 billion of total funds from the IPO, to increase equity in a subsidiary called PT Gading Hotel & Resort, which will disburse the funds to its subsidiary PT Graha Kirana Indonesia to support a hotel development called Zes’t Hotel in Cirebon, West Java.

“The hotel development is in anticipation of an expanding Cirebon, particularly in the tourist and business sectors,” Henry said.

Another 15 percent, or Rp 60 billion, will be used to increase Gading’s equity to another subsidiary PT Swakarsa Adimanunggal, which, through subsidiaries, will be used to fund the residential development of Botanical City, Central Java. Botanical City is designed with 12 clusters, three of which will be allocated to commercial blocks and nine for residential areas that will have up to 3,500 houses.

The remaining funds from IPO will be used as working capital.