This picture taken on January 12, 2011 shows Emirsyah Satar, Garuda Indonesias President Director, attending a press conference in Jakarta. Its symbol is Garuda, the winged steed of Vishnu in Hindu mythology, but Garuda Indonesias fortunes more closely resemble the Phoenix, which rose from the flames to fly again.Hong Kong (News Today) - The top executive of airline PT Garuda Indonesia said the company never considered delaying its listing, despite weak demand and market sentiment that caused the shares to close down 17% on their trading debut last Friday in Jakarta.
“Market forces cannot be controlled,“ Emirsyah Satar, chief executive of Garuda, said in an interview.
He said investors should look beyond the issues plaguing the company's share price and focus on the fundamentals of the Indonesian economy.
“We're not a share for speculators, but for investors to hold long term,“ he said. “Passenger growth is a function of (1/8)gross domestic product(3/8) growth. The market is there.“
Based on statistics from the Center for Asia Pacific Aviation in Sydney, passenger traffic in Indonesia rose 16% in 2009, though the market remains hugely underpenetrated. Of a population of 240 million people, only about 4% have ever traveled by plane.
State-owned Garuda's initial public offering was troubled from early on. Originally, the airline sought to raise $1 billion through a sale of 37% of the company. The sale was then scaled back to a 24% stake, and raised $537 million after the stock priced at the bottom of its indicative range. Even after the size of the offering was cut, almost 40% of the shares had to be absorbed by three domestic lead underwriters, all of which are state-owned.
Ahead of the IPO, “it was very clear that the pricing, the amount of shares, the timing, were in the hands of the owners,“ said Mr. Satar, referring indirectly to the government.
Analysts said Garuda's shares were priced too high, likely because the government hoped to deflect criticism that it was selling state assets on the cheap. Mr. Satar said that at the time of the offering, the Indonesian stock market happened to be falling, but there was never any intention of delaying the IPO.
“The government could delay the IPO, but it would have to come up with the money,“ Mr. Satar added. “As far as management was concerned, we needed the $350 million (1/8)on top of an existing equity base of $380 million(3/8); otherwise we couldn't execute our business plan.“
He said Garuda was reluctant to tap debt markets because of the high cost of borrowing. Concerns over inflation in Indonesia have sent the stock market down 7.7% this year. Garuda shares ended at 560 rupiah (six U.S. cents) Wednesday, down 25% from their listing price of 750 rupiah per share.
Source : kompas
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