PT Jasa Armada Indonesia (JAI), a subsidiary of state-owned port operator PT Pelindo II, plans to conduct an initial public offering (IPO) in December this year to support its business expansion.

To boost investor confidence in purchasing JAI’s shares, the firm received 21 ships from Pelindo II worth Rp 348 billion (US$25.74 million) in a process known as inbreng, in which assets of one company are transferred to another and are treated as capital injection.

The 21 ships comprise 10 tug boats, nine pilot boats and two mooring boats from the parent company, bringing JAI’s total number of ships up to 23.

The firm will release a maximum of 30 percent of its shares to the public, with targeted funds of Rp 2 trillion.

Pelindo II has done non-deal road shows in various countries to inform investors and convince them that JAI has a unique business line. No other company from a similar industry has conducted an IPO before this year.

JAI has chosen three companies as its underwriters: Mandiri Sekuritas, Danareksa Sekuritas and RHB Sekuritas.

JAI plans to buy 15 new ships within two years using the proceeds from the IPO. These ships will be deployed to serve pilotage and tug boat services in its area of operation. Currently, it operates in 12 ports managed by Pelindo II, including in some parts of Sumatra, Java and Kalimantan.

The company is optimistic about its business prospects because the entry barriers are high, making it difficult for competitors. For example, pilotage services at ports are completely under the government’s authority and can only be delegated to state-owned firms.

“In practice, no private or foreign companies have been granted the authority to run pilotage services at public ports,” JAI president director Dawam Atmosudiro said in South Jakarta on Tuesday.

The potential demand for JAI’s services is enormous because all vessels over 500 gross tons (GT) must use pilotage and tug boat services, as all ships are required to turn off their engines in the port areas.

Following the IPO, JAI plans to expand its main business of providing pilotage and tug boat services to areas managed by Pelindo II and dubbed strategic national projects, such as the New Priok port, Kijing, Sorong and Cikarang-Bekasi Laut.

Moreover, it will also actively open new markets by expanding its services for offshore oil and gas activities. JAI is the only company that owns a pilotage license from the Transportation Ministry for these activities.

Meanwhile, JAI’s EBITDA margin — the measurement of a company’s operating profitability as a percentage of its total revenue — in the first half of 2017 stood at 23 percent, a slight increase compared to 20 percent in the same period last year.

Moreover, its net profit margin — the ratio of net profit to revenue — was recorded at 13.9 percent in the January to June period, up from 13.1 percent last year.

Pelindo II chief financial officer Iman Rachman said JAI is an important subsidiary because it is the second biggest contributor to Pelindo’s net profit.

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