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Bumitama Agri launches IPO at 74.5 cents a share

By LIM WEI SHENG

INDONESIAN palm oil producer Bumitama Agri has launched its initial public offering (IPO) for a listing on the Singapore Exchange mainboard, pricing its shares at 74.5 cents each, at the top of its 67.5-74.5 cents indicative range.

The IPO is up to $243.9 million in size based on its global offering of up to 327.324 million shares - assuming an over-allotment portion is fully exercised.

Not including the over-allotment option of 29.754 million shares from the vendor, the global offering is 297.57 million shares, consisting of 273.334 million new shares and 24.236 million vendor shares.

The 297.57 million offer shares comprise a public offer tranche of 15 million shares, a placement tranche of 157.737 million shares and a tranche of 124.833 million shares for cornerstone investors.

Bumitama expects to raise net proceeds of about $195.2 million from the new shares, of which about 73 per cent will be spent on capital expenditure for expansion and development of uncultivated land bank and plantations.

The allotment of the new shares is set to bring Bumitama's total number of issued and outstanding shares to 1.76 billion units, with a market capitalisation of about $1.31 billion.

The IPO has attracted much interest from institutional investors, with the placement being 31 times subscribed, according to Matthew Song, head of equity capital markets, SEA, HSBC. HSBC and DBS Bank are the issue managers and underwriters for the IPO.

More than 150 investors have subscribed, said Mr Song, of which half are global long-only funds, 30 per cent are hedge funds and the remainder a mixture of high net worth individuals and corporate investors. Ninety per cent of them are from Asia.

The IPO is priced at a price-earnings ratio of 11. In relation to listed comparables, Mr Song noted that 'First Resources is currently trading at a ratio of about 11.8, and Golden Agri at a ratio of around 11'. Mr Song also added that Bumitama's PE ratio has met with minimal or zero price sensitivity from investors.

The enthusiastic response towards the offering follows on growing investor interest in commodity spaces, especially in the area of crude palm oil (CPO). 'There is a positive outlook on CPO pricing,' said Mr Song. 'And Bumitama, as one of the youngest plantation involved in the upstream business, is necessarily very sensitive to CPO pricing.'

There is also an increasing interest in palm oil relative to its substitutes, according to Lim Gunawan Hariyanto, CEO of Bumitama. 'The fastest growing in terms of productivity is palm oil. . . The (market) share of palm oil 20 years ago was 14 per cent and today it is 20 per cent. . . For soya bean . . . 20 years ago it was already 18 per cent but now it is (only) about 22 per cent.'

Concurring, Mr Song commented: 'We have seen palm oil outpacing soya bean oil in terms of demand.'

For FY 2011, Bumitama's net profit attributable to owners was 761.9 billion rupiah (S$104 million), down 15 per cent from 892.5 billion rupiah in 2010. 2011 revenue was 2.80 trillion rupiah, a 43 per cent increase from 1.96 trillion rupiah in 2010.

First-quarter results are likely to be 'in line with forecasts', said the company in an interview.

Bumitama's public offer closes at noon on April 10. Share trading is expected to commence on April 12.