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Jakarta Post

Chicken producer Widodo Makmur aims to raise $85m in 'jumbo' IPO

  • Norman Harsono
    Norman Harsono

    The Jakarta Post

Jakarta   /   Fri, January 8, 2021   /   03:37 pm
Chicken producer Widodo Makmur aims to raise $85m in 'jumbo' IPO The globe-shaped logo of the Indonesia Stock Exchange (IDX) is seen on March 13, 2020 in the lobby of the bourse, located in Jakarta. (JP/Seto Wardhana)

Chicken producer PT Widodo Makmur Unggas (WMU) aims to raise Rp 1.18 trillion (US$84.69 million) to finance its expansion plans through a giant initial public offering (IPO) in a relatively weak but stable market.

The company is offering 5.92 billion shares, which represent 35 percent of the company’s paid-up capital, priced at between Rp 142 and Rp 200 per share. Its shares are then to be listed on the Indonesia Stock Exchange (IDX) on Jan. 29.

The company plans to use 74.3 percent of the IPO funds to expand its facilities, including slaughterhouses, farms and storage warehouses. The remaining 25.7 percent is to be used as working capital to buy live chickens and chicken feed.

“We will focus on [expanding] the slaughterhouse business to increase chicken production. Our target is to hold 15 percent [of the market share],” WMU president director Ali Masadi said at the public expose on Wednesday.

“Broiler chickens are the cheapest meat compared to other animal proteins,” he added.

The company’s IPO will be the second largest this year following oil palm plantation company PT FAP Agri’s IPO of around Rp 1 trillion on Jan. 4.

The poultry producer’s IPO funding target also exceeds the largest IPO in 2020, when PT Metro Healthcare Indonesia (CARE) went public on March 3 to raise Rp 1.03 trillion.

Through its giant IPO, WMU is positioning itself as a strong newcomer in the multibillion-dollar poultry industry, currently dominated by publicly listed PT Charoen Pokphand Indonesia (CPIN) and PT Japfa Comfeed Indonesia (JPFA).

However, the latest available data shows that its competitors still dwarf WMU’s assets, valued at Rp 1.33 trillion in October 2020, with Charoen valued at Rp 31.24 trillion and Japfa at Rp 26.8 trillion in September.

Statistics Indonesia (BPS) data show that Indonesia’s chicken consumption per capita has grown steadily over the past 14 years, increasing 56.9 percent from 0.079 kilograms per person per week in 2007 to 0.124 kg per person per week in 2019.

Mirae Asset Sekuritas Indonesia places the poultry industry among the three industries with promising growth in 2021. The other two are banking and mining.

Mirae securities analyst Emma Fauni wrote in a research note on Dec. 11 that domestic demand for chicken meat declined significantly last year, after hotels and restaurants in big cities closed under the large-scale social restrictions (PSBB).

However, demand would remain steady this year because “the current demand represents individual daily consumption of chicken meat per day”, and it was improbable that people would reduce spending on daily staples, she noted.

Furthermore, the firm expected the government to limit the chicken supply this year to maintain stabilize prices at between Rp 17,000 and Rp 20,000 per kg of chicken meat. The government’s objective was to protect small-scale chicken farmers amid a volatile market, Emma continued, but price stability “could increase business players’ confidence” in this year’s market despite the “hefty” sacrifices of last year.

Emma also noted that the weakening US dollar would be advantageous for Indonesia’s chicken industry, as most producers relied on imported soybean for chicken feed.

“Price fluctuations are very rare. Even if there were any, they’re very short [...] that’s the advantage of a big storage [facility],” CIMB Sekuritas director I Wayan Gemuh said on Wednesday.

He was referring to WMU’s chicken cold storage warehouse, said to be the largest in Indonesia with a capacity of 9,000 tons. CIMB Niaga Sekuritas, BRI Danareksa Sekuritas and Samuel Sekuritas are the underwriters for WMU’s IPO.

The chicken producer is 90 percent owned by integrated livestock agriculture holding company PT Widodo Makmur Perkasa (WMP). Tumiyana, a former president director of state-owned construction firm PT Wijaya Karya, is WMP’s founder and owns 87.5 percent of its shares.