Jan 25, 2011

Garuda Indonesia IPO set at Rp750

PT Garuda Indonesia Tbk has set a final price of initial public offering (IPO) at Rp750 per share.The IPO price is the lowest level of the price range at Rp750-Rp1,100 per share. However, Garuda has finally downsized the IPO size
The final price is reflecting 74.04x annualized of price to earning ratio (P/E) last year, which is so expensive.
In 2011 and 2012, Mandiri Sekuritas, one of Garuda IPO's underwriters, estimated Garuda Indonesia might post Rp761 billion and Rp1.01 trillion net profit respectively. 
With a total 25.66 billion shares, earning per share in 2011 and 2012 are estimated to reach Rp29.65 and Rp39.63 respectively. Referring to the final of Rp750, estimated P/Es for 2011 and 2012 are 25.29x-18.92x P/E. Is it too expensive for the newly IPO?
Another Garuda's shareholder PT Bank Mandiri Tbk (BMRI) will bag Rp1.45 trillion from the shares sale.In total, Garuda IPO is expected to raise Rp7.02 trillion-Rp10.29 trillion by selling 9.36 billion shares or 36.5% shareholding to public investors. Garuda plans to use the proceed for capital expenditure. A source said the lowest level reflects the market demand for Garuda is weak.

Disclosure: No position at the stock mentioned above.

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