State-owned cement producer PT Semen Baturaja hopes to raise up to Rp 1.6 trillion ( US$163.23 million ) in funds from an initial public offering ( IPO ) to support its expansion.
The company announced in Jakarta on Wednesday that it would sell about 2.34 billion shares or 23.8 percent of its enlarged shares during the IPO, which would be carried out later in June. The shares will be priced between Rp 500 and Rp 685 apiece.
Semen Baturaja president director Pamudji Rahardjo said the company expected to raise up to about Rp 1.6 trillion from the sales of the new shares to be sold at between Rp 500 and Rp 685 apiece.
He said that the Palembang-based Semen Baturaja planned to use the funds to be generated from the IPO to partly finance the construction of its integrated cement factory in South Sumatra this year. The factory, worth Rp 2.65 trillion, is expected to increase the company's annual production capacity to 3.85 million tons by 2016 from the current 1.25 million tons per year.
The rest of the construction funds will be raised from bank loans and internal cash. Semen Baturaja reported that its total assets reached Rp 1.2 trillion by the end of 2012. Its liabilities stood at Rp 245 billion, while its equities amounted to Rp 954 billion.
Following the IPO, the government's ownership within the company will be reduced to 76.2 percent.
Semen Baturaja has appointed state-owned PT Bahana Securities, PT Danareksa Sekuritas and PT Mandiri Sekuritas as underwriters for the IPO, scheduled to take place from June 20 to 24. Semen Baturaja would not hold overseas road shows to attract investors and instead, would offer the shares domestically, it said in a statement.
The book building period will run until June 7 and the shares are slated to be listed on the Indonesia Stock Exchange ( IDX ) on June 28. With the IPO, Semen Baturaja will join other cement producers in the stock market, such as PT Semen Indonesia ( SMGR ), PT Indocement Tunggal Prakasa ( INTP ) and PT Holcim Indonesia ( SMCB ).
At the moment, the company produces Portland cement type I and composite Portland cement from its three factories in Baturaja and Palembang, South Sumatra province, and in Panjang, Lampung province. Besides South Sumatra and Lampung provinces, its marketing area also covers Bengkulu, Jambi and Bangka Belitung Islands provinces.
It claims to control the largest market share in both South Sumatra and Lampung with 48.2 percent and 27.6 percent, respectively. Last year, it produced and sold 1.23 million tons of cement, reaching its optimum production capacity. Its sales grew 4.6 percent to Rp 1.1 trillion from 2011 and its net profits rose by 18.6 percent to Rp 299 billion.
Semen Baturaja is looking to increase its market share in South Sumatra this year with the launch of a new cement mill in June. The Rp 350 billion mill will have a production capacity of 750,000 tons per year. According to Semen Baturaja president director Pamudji Rahardjo, the company's share in the region will increase to 51 percent.
Panin Sekuritas analyst Fajar Indra said the company had good prospects, citing its financial situations and the overall development of the country's construction sector. However, he added, Semen Baturaja's relatively small coverage area might pose as a downside.
'It depends heavily on the Sumatra and Lampung markets. It also relies on the construction of its new factory and the Sundra Strait Bridge project to boost its performance, but there's still a long way to go to 2016 and we don't know when the bridge project will be realized,' he said.