Barito Renewables Energi (BREN), a green energy issuer owned by tycoon Prajogo Pangestu, recently began its public offering phase, which will run until Wednesday, October 4, 2023. BREN decided to offer its IPO at the upper range, or offered to investors at a price of IDR 780/share, which implies the strong investor enthusiasm during the bookbuilding period.
At this price range, BREN, which will issue 4.5 billion new shares or representing 3.35% of the issued and paid-up capital, will raise fresh funds of IDR 3.51 trillion. This also indicates that BREN’s market capitalization immediately after listing will reach IDR 104.77 trillion.
This market capitalization will make BREN one of the 20 most valuable companies on the Indonesia Stock Exchange (IDX).
Is the Valuation Already Expensive or Still Cheap?
If the BREN IPO goes according to plan, the company’s book value will increase from IDR 54 before the IPO to IDR 79 after it officially lists. This means that at the time of the initial public offering, the BREN share price price at almost 10 times the company’s book value.
As a comparison, the main competitor of BREN, which operates in the field of geothermal power supply, Pertamina Geothermal Energy (PGEO), is currently trading at only 2.13 times book value. As a note, the PGEO share price has jumped 65% from the IPO price as of the closing of trading last weekend.
Historically, Prajogo’s issuers are generally priced at a premium by investors. However, the valuation for BREN can be said to be very expensive, with two other issuers owned by Prajogo, Chandra Asri Petrochemical (TPIA) and Barito Pacific (BRPT), each trading at 5.34 and 5.18 times book value.
The company is known to have consistently recorded growth in terms of both revenue and net income. BREN’s nominal top line is larger than its main competitor PGEO, but Pertamina’s subsidiary has better bottom line.
BREN’s net income for the four quarters ended (trailing twelve months/TTM) record at IDR 1.47 trillion or basic earnings per share (TTM) of IDR 10.95/share. This means that the IPO price of BREN shares is trading at 71.22 (P/E ratio) times basic earnings per share.
This figure is relatively expensive, with the broader index (IHSG) having a P/E ratio of 17.69, while the company’s main competitor, PGEO, is record to have a P/E ratio of 21.8. Even nickel mining issuers, which are also consider to be one of the drivers of the green transition, have much cheaper P/E valuations.
Factors to Consider When Evaluating BREN’s Valuation
There are a number of factors to consider when evaluating BREN’s valuation, including:
Growth prospects: BREN is well-position to benefit from the growing demand for green energy in Indonesia and the world. The company has a number of projects in the pipeline, and it is expect to continue to grow rapidly in the coming years.
Competitive landscape: BREN is one of the leading green energy companies in Indonesia. It has a strong track record and a good management team. However, the company faces increasing competition from other domestic and international players.
Risk factors: BREN operates in a highly regulate industry, and it is expose to a number of risks, including regulatory changes, currency fluctuations, and commodity price fluctuations.
Overall, BREN is a promising company with a bright future. However, its valuation is relatively high, and investors should carefully consider the risks involve before investing.
Investors should also consider their own investment objectives and risk tolerance when evaluating BREN’s valuation.
Investors who are looking for a company with strong growth prospects and a good track record may be willing to pay a premium valuation for BREN.
Investors who are more risk-averse may want to wait until the company’s valuation has come down before investing.
Ultimately, the decision of whether or not to invest in BREN is a personal one. Investors should carefully consider all of the factors involved before making a decision.