• Raharja Energi Cepu (RATU), one of RAJA’s subsidiaries, deals in upstream oil & gas with two strategic operating blocks: Cepu (2.2% participating interest under PJUC) in Central Java and Jabung (8% under RETJ) in Jambi, Sumatra. Both blocks have relatively long contracts with Cepu’s expiring in 2035 and Jabung’s in 2043.
• RATU’s operations should benefit from relatively high oil prices (2024 Ytd.Avg:USD 80.2/bbl, -2.2% YoY) and increased volumes through the two aforementioned assets, yielding 2P reserve of 199 mmboe and 8.8 mmboe. Thus far, the company achieved relatively solid 1H24 performance, reporting earnings of USD 7mn (+20.5% YoY).
• Offering 190mn new shares and 352mn divested shares from RAJA through POES, RATU’s IDX listing with 20% free-float will be on 8 January 2025. IPO proceeds, which range between IDR 489–624bn (USD 30.7–39.2mn), will be fully allocated towards its subsidiaries’ loan settlements amounting to USD 9.8 mn.
• With offering price range of IDR 900-1,150, RATU’s valuation stands at 9.1-11.6x 2024F P/E, representing 19.8% discount on the lower-end and 2.3% premium at the higher-end of the sector’s average.
• Post-IPO, RATU will conduct PO for RAJA’s shareholders with implied diluted conversion ratio of 7:1. Our base case scenario reveals that investors would be better-off applying for RATU’s IPO as our calculations suggest that POES exercise will lead to investors’ net loss of -6% (Figure 1). Subscribe to RATU.