Garuda IPO hit by pricing worries

Garuda Indonesia has reportedly encountered strong institutional resistance to its IPO, raising concerns that it may raise less than the USD1 billion the airline is aiming for (Financial Times, 24-Jan-2011). The low level of institutional interest would be a blow to Garuda, which has completed a five-year debt restructuring and turnaround in its financial and safety performance as well as its product. The Indonesian Government is believed to have insisted on a high IPO price against the advice of banks. Institutional investors have reportedly complained that the pricing valued the airline at 18 times forecast earnings, compared with about eight times earnings for Thai Airways and nine times for Cathay Pacific.