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Samudra Energy pulls IPO, reasons clouded

While company blames market volatility, observers cite company-related factors

Global market uncertainty and concerns over a share-price drop after listing have prompted Samudra Energy to pull the plug on its initial public offering, though others point to more company- specific factors - PHOTO: SAMUDRA ENERGY

[SINGAPORE] Global market uncertainty and concerns over a share-price drop after listing have prompted Samudra Energy to pull the plug on its initial public offering, though others point to more company- specific factors.

"Given the current market volatility, we think that now is not the optimal time for Samudra Energy to move forward with an IPO," said its CEO and executive director Ridwan Rusli. "It was a collective decision on timing by the company and its sponsors with a view towards ensuring a strong after-market performance and thus the most successful IPO possible for all stakeholders and investors."

The decision by Samudra, which would have otherwise become the largest South-east Asian energy group on the Singapore Exchange (SGX), also puts a dampener on the local IPO market that had just been revving up after a tepid first half of the year.

SGX has seen a burst of IPO activity since July, with three listings taking place on the mainboard and four on Catalist, raising S$1.3 billion and notching up S$3.4 billion in market value.

This compares with two mainboard and six Catalist listings that raised S$886.5 million and added S$4.1 billion in market capitalisation in H1.

But not all have performed well. Accordia Golf Trust sank as much as 17.5 per cent in its trading debut last Friday, though it eventually recovered to close at 85 Singapore cents - still down 12.4 per cent from its IPO price of 97 Sing cents.

Global equity markets have turned jittery in recent weeks over news of the bailout of a major Portuguese bank, Argentina's debt default and rising tensions in the Russia-Ukraine crisis.

It remains to be seen if other upcoming IPOs such as IReit Global Group - set to be the first Reit here with office assets in Germany - and Indonesian meat and dairy producer Japfa will be affected, with bankers saying that Samudra's decision was probably due more to company-specific factors than market developments.

"I don't think those are a major factor unless you're directly impacted through assets or business in that part of the world," an investment banker told BT. "I think it's got to do with the fact that it was in a sector that was not well understood and the only one other precedent, KrisEnergy, has seen quite a fall in its price."

Capital markets publication IFR reported that some investors had started pulling out of orders towards the end of Samudra's bookbuilding period, although the IPO books were covered.

Samudra owns eight upstream assets, comprising three oil-producing blocks in South Sumatra, an asset in development stage and four exploration assets. It has proven oil reserves of 49 million barrels of oil equivalent (mmboe) and contingent reserves of 39.3 mmboe, and last year reported revenues of US$54.2 million and a net loss of US$33.6 million.

KrisEnergy, which held a successful IPO in July last year, has slightly less proven reserves of 32.3 mmboe but more contingent reserves of 53.9 mmboe. Its shares are down 41 per cent so far this year, after plunging in January when the firm said it had plugged and abandoned an exploration well in a promising Vietnamese prospect.

Samudra did not disclose the offer price and number of shares offered in its prospectus filed on July 24, but Reuters, citing a term sheet it saw, reported on the same day that it was looking to sell about 131 million shares, excluding the greenshoe option, at an indicative price range of S$1.89-2.11 a share, to raise S$248-276.3 million.

The listing was scheduled for next Thursday, FinanceAsia reported.

Samudra had said it intended to use the funds raised to settle its term loan and lender warrants of last year - in order to lower its borrowing costs and push towards profitability - as well as to finance planned capital expenditure and for general working capital.

The planned IPO had a star-studded cast of cornerstone investors who had reportedly agreed to take up a separate 45.1 million shares of its offering: Hong Kong billionaire Li Ka- shing, through Hutchison Whampoa unit Sky Trinity; Malaysian tycoon Quek Leng Chan, through Hong Leong Company (Malaysia)'s subsidiary Guoline Capital; and Mr Quek's associate Paul Poh, through private equity firm Caprice Capital International. Hedge fund OCP Asia was also another cornerstone investor, while Robert Kuok's Kerry Group is an early investor in the company, holding 21.9 per cent.

But these high-net- worth investors have no sway over institutional investors, said the banker BT spoke to.

"In terms of guiding institutions and investors who have sophisticated methodology, I think those people would not be necessarily influenced nor easily draw any confidence from these names. Having an institutional cornerstone would probably carry a bit more weight."

Samudra is part of private equity firm Northstar Group, which focuses on Indonesia and South-east Asia, and counts US private equity firm TPG Capital as a shareholder.

Credit Suisse and Nomura are the joint global coordinators and bookrunners with CIMB.