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Garuda Indonesia maintenance unit seeks $300m in share sales

GMF AeroAsia will use IPO, strategic investors to expand, revamp Asia-Pacific ops

GMF AeroAsia operates a maintenance facility at Soekarno-Hatta Airport outside Jakarta. (Photo by Erwida Maulia)

JAKARTA -- The maintenance unit of flag carrier Garuda Indonesia aims to raise at least $300 million by selling shares via an initial public offering as well as to "strategic investors," a company executive said Monday.

Garuda Maintenance Facility AeroAsia will offer up to 20% of its shares at a price range of 390 rupiah to 510 rupiah each in an IPO on the Indonesia Stock Exchange slated for Oct. 10, GMF President Commissioner Helmi Imam Satriyono told reporters. GMF will tour some Asian cities in the next several weeks to meet with potential investors.

The company plans to sell another 10% to strategic investors "who can share knowledge and expertise," Satriyono said.

"We want to strengthen our position as the market leader domestically, and to expand our global footprint," he said.

GMF President Director Iwan Joeniarto said around 60% of the net proceeds will be used to upgrade and expand the company's MRO -- aircraft maintenance, repair and overhaul -- capacities and capabilities. About 25% of the money will support daily operations, while 15% goes to debt refinancing.

The maintenance unit previously said it is considering building new facilities in Batam, an Indonesian city near Singapore, in addition to its main operations at Soekarno-Hatta International Airport on the outskirts of Jakarta. The company intends to bring its services closer to the region's largest aviation hub, Singapore's Changi Airport. GMF wants to develop "new variants" of services so as to cater to a wider range of customers, Joeniarto said.

The company leads the Indonesian MRO industry, controlling 32% of the market. Main rival Batam Aero Technic, run by top Indonesian private airline Lion Air, holds a 15% market share.

The aviation industry will continue growing faster in the Asia-Pacific region compared with the rest of the world, Joeniarto said, and that means large market potentials for GMF.

"Competition in the aviation industry is tough, but not in the MRO industry [because] there are many certification requirements," said Thennesia Debora, analyst at BNI Sekuritas.

GMF holds certificates from international organizations such as the Federal Aviation Administration in the U.S. and the European Aviation Safety Agency. This will let the company compete with regional players such as Hong Kong Aircraft Engineering and SIA Engineering, part of the Singapore Airlines Group, Debora said.

"GMF still has room for expansion," she said. "Many Indonesian airlines do servicing in Singapore because of limited capacity for engine maintenance."

The company has become a key profit contributor to Garuda, which faces heavy competition in its core airline business. The parent posted a net loss of $283 million in the first half of the year, though this was due mostly to penalty payments from participating in the government's tax amnesty program. However, GMF booked $20.8 million in net profit in the same period. It booked an average 21% annual revenue growth from 2014 to 2016, while its profit rose 78%.

The IPO will be Indonesia's largest since Waskita Beton Precast, a unit of state-owned construction company Waskita Karya, raised 5.1 trillion rupiah ($387 million at current rates) in September 2016. Joeniarto said this will be the first initial public offering by an MRO provider in the region since that of SIA Engineering 17 years ago.

Nikkei staff writers Wataru Suzuki and Bobby Nugroho in Jakarta contributed to the story.

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