PP Property Tbk (PPRO), whose IPO was at a price of USD 185 on May 19, 2015, is finally on its fair price of Rp 505 after touching Rp 535. The IPO price was too low, reflecting only about 1x PBV. It did not reflect the growth potential possessed by PPRO. As a result, it had been difficult for PPRO to get appreciation from the market.
PPRO’s preparation for IPO was sub-optimal, relying only on the controlling shareholder’s known brand, PT PP (Persero) Tbk, a state-owned construction. There are a lot of things that can be done before IPO, namely strengthening PPRO brand and projects in the market or draw the market’s attention on its contribution to the performance of its parent.
On the other hand, the underwriters seconded by PPRO had a lack of confidence in PPRO’s performance. Their target price was only Rp250, which was only about 1,3 times PBV, whereas PBV in the property sector was already above 2 times. The market naturally would set their mind on the fixed number and would naturally have a suggestive maximum level. And because they were less confident with the track record of PPRO’s new shares, investors will not buy at Rp250.
Fortunately PPRO’s cheap price was readily known to the market. The share price has hurriedly been increasing from Rp175 at the end of the year to Rp505. Rp505 reflects 2,1x PBV, equivalent to the average PBV of the property sector.
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