PGN’s share price will be between Rp1,300 -- Rp2,100

Government has decided to sell the 39 percent shares of state-owned gas utility PT Perusahaan Gas Negara (PGN) at a price of between Rp 1,300 and Rp 2,100 each through an initial public offering (IPO), Bisnis Indonesia newspaper reported in its front page on Friday.

The company is expected to fix the price on December 3.

“We have fixed the price range of PGN shares after considering the pre-marketing result, PGN’s business prospect and comparing with Kogas (Kogas is similar gas company from South Korea),” State Minister for State Enterprises Laksamana Sukardi said during a public expose on PGN’s IPO in Jakarta on Thursday.

PGN, according to Laksamana, is the only company in Indonesia which deals with gas and its infrastructure, can only be compared with the Korean company Kogas which has enterprise value (EV) of 7 times to EBITDA (earning before interest, tax, depreciation and amortization).

Laksamana said the government has decided that PGN’s EV would be 5-7.25 times.

The IPO is expected to raise between Rp 1.2 trillion and Rp 2 trillion in cash

PGN said in its prospectus that it will sell up to 1.69 billion shares, of which 1.29 billion will be issued in the first stage. The remaining shares will be issued if the first batch is oversubscribed.

PGN has named state-owned PT Danareksa Sekuritas, Credit Suisse First Boston and ABN Amro Asia Securities as joint lead underwriters for the IPO.

The price indication also looks a bit expensive, said Norico Gaman, an analyst at PT BNI Securities in Jakarta.

Part of the proceeds from the PGN IPO also will go toward deficit reduction, while the rest will be used for PGN's business expansion.

The company, which virtually controls the transmission, distribution, wholesale and retail sale of natural gas in Indonesia, posted a net profit of Rp422.2 billion in the first six months of this year, down 18% from Rp517.5 billion a year earlier. PNG attributed the decline to a 50% drop in other income, which includes interest income and foreign exchange gains, to Rp81.2 billion from Rp162.8 billion.

Its operating income, however, rose over 11% to Rp5001.1 billion from Rp448.6 billion.

Last week PNG officials said they expect higher gas sales to boost revenue this year to Rp8.425 trillion, up from Rp4.273 trillion in 2002.

The IPO will be open for subscription from Dec. 8 to Dec 10, and the stock will be listed on the Jakarta and Surabaya stock exchanges on December 15. (*)