Indonesian chicken producer PT Widodo Makmur Unggas (WMU) aims to raise 1.18 trillion rupiah ($83.5 million) to finance its expansion plans through a giant initial public offering (IPO) in a relatively weak but stable market.
The company is offering 5.92 billion shares, which represent 35 per cent of the company’s paid-up capital, priced at between 142 and 200 rupiah per share. Its shares are then to be listed on the Indonesia Stock Exchange (IDX) on January 29.
The company plans to use 74.3 per cent of the IPO funds to expand its facilities, including slaughterhouses, farms and storage warehouses. The remaining 25.7 per cent is to be used as working capital to buy live chickens and chicken feed.
WMU president director Ali Masadi said at the public expose on January 6: “We will focus on [expanding] the slaughterhouse business to increase chicken production. Our target is to hold 15 per cent [of the market share].
“Broiler chickens are the cheapest meat compared to other animal proteins.”
The company’s IPO will be the second largest this year following oil palm plantation company PT FAP Agri’s IPO of around one trillion rupiah on January 4.
The poultry producer’s IPO funding target also exceeds the largest IPO in 2020, when PT Metro Healthcare Indonesia (CARE) went public on March 3 to raise 1.03 trillion rupiah.
Through its giant IPO, WMU is positioning itself as a strong newcomer in the multibillion-dollar poultry industry, currently dominated by publicly listed PT Charoen Pokphand Indonesia (CPIN) and PT Japfa Comfeed Indonesia (JPFA).
However, the latest available data shows that its competitors still dwarf WMU’s assets, valued at 1.33 trillion rupiah in October, with Charoen valued at 31.24 trillion rupiah and Japfa at 26.8 trillion rupiah in September.
Statistics Indonesia (BPS) data show that Indonesia’s chicken consumption per capita has grown steadily over the past 14 years, increasing 56.9 per cent from 0.079kg per person per week in 2007 to 0.124kg per person per week in 2019.
Mirae Asset Sekuritas Indonesia places the poultry industry among the three industries with promising growth in 2021.The other two are banking and mining.
Mirae securities analyst Emma Fauni wrote in a research note on December 11 that domestic demand for chicken meat declined significantly last year, after hotels and restaurants in big cities closed under the large-scale social restrictions (PSBB).
However, demand would remain steady this year because “the current demand represents individual daily consumption of chicken meat per day”, and it was improbable that people would reduce spending on daily staples, she noted.
Furthermore, the firm expected the government to limit the chicken supply this year to maintain stabilise prices at between 17,000 and 20,000 rupiah per kg of chicken meat.
The government’s objective was to protect small-scale chicken farmers amid a volatile market, Emma continued, but price stability “could increase business players’ confidence” in this year’s market despite the “hefty” sacrifices of last year.
Emma also noted that the weakening US dollar would be advantageous for Indonesia’s chicken industry, as most producers relied on imported soybean for chicken feed.
CIMB Sekuritas director I Wayan Gemuh said on January 6: “Price fluctuations are very rare. Even if there were any, they’re very short . . . that’s the advantage of a big storage [facility].”
He was referring to WMU’s chicken cold storage warehouse, said to be the largest in Indonesia with a capacity of 9,000 tonnes. CIMB Niaga Sekuritas, BRI Danareksa Sekuritas and Samuel Sekuritas are the underwriters for WMU’s IPO.
The chicken producer is 90 per cent owned by integrated livestock agriculture holding company PT Widodo Makmur Perkasa (WMP).
Tumiyana, a former president director of state-owned construction firm PT Wijaya Karya, is WMP’s founder and owns 87.5 per cent of its shares.
THE JAKARTA POST/ASIA NEWS NETWORK