#1Indonesia IPO Markets Watch Period-to-Date Q3 2023 20 October 2023 pwc#2Contents Indonesia Overview of Period-to-Date (PTD) Q3 2023 IPO performance Spotlight on: IDX Market Capitalisation Southeast Asian bourses Sustainability disclosure requirements in Southeast Asia Perception gap between investors and CEOs on climate- change threat and energy transition exposure PwC 3 5 00 6 7 9 2#3Overview PTD Q3 2023 IPO performance in Indonesia The Indonesian Stock Exchange (IDX) continues its impressive performance as of 30 September 2023 raising Rp 49,431 billion or US$3.2 billion (Q3 2022: Rp 21,881 billion or US$1.4 billion) from a total of 66 IPOS (Q3 2022: 44). The Indonesian IPO market stands as a testament to its resilience and vitality, as it continues to exhibit a robust growth trajectory. Throughout Q3 2023, 66 companies have been listed on the IDX. As of Q3 2023, IPO funds raised (in billion Rp) 70,000 60,000 there were 890 companies listed on IDX with market capitalisation of 50,000 Rp10,288 trillion or 40,000 US$662.6 billion. 30,000 This remarkable influx of companies seeking to go public underscores Indonesia's position as a thriving hub 20,000 for business expansion and investment opportunities. 10,000 No of IPOS 70 60 50 50 40 40 30 50 20 20 10 10 Sector-wise, the consumer cyclicals sector dominated with 12 listed companies, followed by the technology, industrial and consumer non-cyclicals, with 8 listed companies, respectively. Notably, from early 2022 through 2023, the IPO market witnessed a significant shift in industry play. Tech startups, which dominated the market, gave way to the energy & minerals sector, particularly the renewable energy, nickel and other metals. As compared to PTD Q3 2022, PTD Q3 2023 saw a 33% increase in the number of new IPOS and a 56% increase in IPO proceeds. This was largely due to the sizable IPOs in renewable energy and nickel sector that contributed 79% to total IPO proceeds for PTD Q3 2023: PwC 0 No of IPO by Board - Q3 2023 2019 2020 2021 ■Main Board Q4 3,670 357 30,458 15 13 Q3 8,705 1,608 25,005 2022 11,257 3,369 Q3 2023 15,526 Development Q2 1,221 870 4,095 15,323 21,395 Board Q1 1,182 2,743 3,050 3,189 12,510 38 Acceleration Board No of IPO 55 51 54 59 66 Amman Mineral Harita Nickel Q1 Q2 Q3 Q4 No of IPO Rp 10.7 Rp 10 Source: IDX website trillion (US$ 712 million) trillion (US$ 683 million) Rp 9.2 trillion (US$ 627 million) Pertamina Geothermal Rp 9.1 trillion (US$ 594 million) 3 Merdeka Battery#4Top 10 IPO Listings in 2023 Performance of Top 10 IDX Listings by Proceeds in 2023 1 Amman Mineral Energy - Copper Rp10.726 bil Listing Date: 7 July 2023 6 Offering Price: Rp1.695 Last close*: Rp5.925 VKTR Teknologi Automobiles & Components Rp875 bil Listing Date: 19 June 2023 Offering Price: Rp100 Last close*: Rp126 Source: IDX website *Last close as 29 September 2023 2 Harita Nickel Energy - Nickel Rp9.997 bil Listing Date: 12 April 2023 Offering Price: Rp1.250 Last close*: Rp1.085 7 Hillcon Energy - Coal Rp553 bil Listing Date: 1 March 2023 Offering Price: Rp1.250 Last close*: Rp2.490 3 Merdeka Battery Energy - Nickel Rp9.182 bil Listing Date: 18 April 2023 Offering Price: Rp795 Last close*: Rp805 8 Mandiri Herindo Energy - Coal Rp492 bil Listing Date: 25 July 2023 Offering Price: Rp118 Last close*: Rp199 4 Pertamina Geothermal Renewables Energy Rp9.056 bil Listing Date: 24 February 2023 Offering Price: Rp875 Last close*: Rp1.445 9 Nusantara Sawit Sejahtera Palm Oil Rp453 bil Listing Date: 10 March 2023 Offering Price: Rp127 Last close*: Rp200 5 Cinema XXI Consumer Business Rp2.250 bil Listing Date: 2 August 2023 Offering Price: Rp270 Last close*: Rp300 10 Erajaya Consumer Products Rp405 bil Listing Date: 8 August 2023 Offering Price: Rp390 Last close*: Rp318 PwC 4#5Spotlight on: IDX Market Capitalisation Surviving challenging periods 2015: Market Turbulence Inflation, high interest rates, declining exports, slow down in the Chinese economy marked by Yuan devaluation and the collapse of oil prices triggered the downward slope in both the national and global economies. In 2015, the Indonesian rupiah plunged at a level not seen since 1998. The Indonesian economy slowly picked up in H2 2015 and grew further. Growth was supported by a sound level of economic stability marked by low inflation, decline in the current account deficit, stable exchange rate, and well-maintained financial system stability with low systemic risks. 2018: US and China Trade Tension The escalating trade tension between the United States (US) and China resulted in the US Federal Reserve's decision to raise its benchmark interest rate 4X during the 2018, a total of 100 basis points. This situation impacted emerging economies, including Indonesia. The negative sentiment from international investors was felt in weakening of the Rupiah and the drop in the Jakarta Composite Index. Amidst the trade tension, Indonesia managed to grow by minimising risks and optimising benefits. PwC In Rp trillion 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Market Capitalisation 2015 - Q3 2023 The market capitalisation of IDX has grown more than 50% from 2015 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 Feb-17 Jul-17 Dec-17 2020 - Covid-19 Pandemic May-18 Oct-18 Mar-19 Aug-19 Jan-20 Jun-20 Nov-20 Apr-21 Sep-21 Feb-22 Jul-22 Dec-22 May-23 Source: World Federation of Exchanges Not long after the WHO declared COVID-19 as a pandemic in March 2020, the global economy started to nosedive, leading to one of the worst crisis since World War II. As outlined in the January 2021 edition of the World Economic Outlook, the IMF estimated that global economic growth in 2020 contracted -3.5%. The global contraction included a -4.9% for developed countries and a -2.4% for developing countries with emerging markets, including Southeast Asia. Keeping the growth momentum 2021-2022: Road to Recovery Global and domestic economic conditions were gradually recovering from the 2020 crisis. The approval of the Omnibus law, tax reforms, the introduction of IDX Acceleration Board and harnessing the technology start up boom that started in 2020 all helped spur investments. The Indonesian Capital Market showed an uptick in IPO activities. H2 2021 produced blockbuster IPOs of Bukalapak (IPO proceeds of Rp 21,900 billion) and Mitratel (IPO proceeds of Rp 18,794 billion). The momentum continued in April 2022 when Indonesia's biggest technology company GoTo Group staged its public debut raising IPO proceeds of Rp 13,272 billion. 2023: Start of the Renewable Energy Era A new trend has emerged - green transition themed entities (that is, those involved in batteries for electric vehicles and renewable energy). Indonesia holds the world's largest nickel reserve with up to 25% global share, making the country the most attractive market destination for investors. The country also aspires to be a global EV supply chain hub. There were sizable IPOs from the renewable energy and metals/minerals sector. 2023 could be the best year for the Indonesian Stock Exchange. 5#6Southeast Asian bourses Indonesia: the highest number of IPOs in Southeast Asia in the last 5 years Indonesia's IPO market is the leading force in Southeast Asia for listings, staying strong despite the pandemic challenges since 2020 and maintaining this momentum into Q3 2023. This success reflects the IDX enduring appeal to investors, bolstered by its commitment to well-maintained political and macroeconomic stability. Indonesia contributed 5 companies in the top 10 listings in Southeast Asia with the largest funds raised as of Q3 2023: Leading as Top 5 IPO Funds Raised in Southeast Asia 1 Amman Mineral 2 US$712 million 3 Merdeka Battery US$627 million 4 Harita Nickel US$683 Pertamina Geothermal US$594 million No of IPOS 70 99 66 60 55 59 55 554 54 51 50 41 42 40 30 50 34 30 35 55 28 29 29 27 25 19 20 11 11 11 78 8 10 23 6 0 2019 2020 2021 2022 Q3 2023 Radlum Development US$94 million ■Indonesia ■Malaysia Philipines Singapore Thailand Source: Official stock exchange websites, excluding reverse takeovers and secondary listings PwC million 5 Cinema XXI US$149 million Malaysia: advancing in the IPO landscape. In 2023, Malaysia's IPO market is poised for growth, with the Malaysia Stock Exchange aiming for 39 new companies to go public, emphasizing the nation's commitment to its capital market. As of Q3 2023, several significant IPOs have already left their mark on the exchange, shaping its trajectory and fostering opportunities for expansion and innovation. One of the companies listed in the Malaysia Stock Exchange entered the top 10 listings with the largest funds raised as of Q3 2023: Thailand: maintains a firm second-place position in terms of the number of IPOs in Southeast Asia. In the highly competitive Southeast Asia IPO landscape, Thailand holds the strong second position as of Q3 2023. This is a testament to the nation's consistent appeal to businesses, driven by its vibrant economy and dynamic market conditions. Thailand had four companies among the top 10 listings that raised the most funds as of Q3 2023: 7 9 Master Style 8 Millenium Group 10 US$91 million US$65 million Samart Aviation US$87 million P.S.P Specialities US$62 million 6#7Sustainability disclosure requirements in Southeast Asia The global ESG reporting landscape is transforming, with corporate activity set to be highly scrutinized under new sustainability reporting standards. There has been some progress towards global alignment, such as the recent release of the International Sustainability Standards Board's Sustainability and Climate-related disclosure standards. Here's a recap of sustainability disclosure requirements applicable to listed companies for each territory in the SEA region: Jurisdiction Regulation name Year enacted / Planned enacted Target Company Indonesia OJK Regulation No. 51/POJK.03/2017 2019 Malaysia Sustainability Framework 2015 Public listed companies Philippines SEC Memorandum Circular No. 4 Sustainability Reporting Guidelines for Listed Companies 2019 Source: Sustainable Fitch (September 2023) PwC Financial institutions, issuers and public listed companies Public listed companies At a glance This regulation makes it mandatory for any financial institution, issuer and public company to prepare an annual sustainability report to accompany their annual report. Implementation of the requirement is gradually being phased in between 2022 and 2024. In September 2022, Bursa Malaysia Securities Berhad announced the enhancement of sustainability reporting requirements. It includes a new climate change reporting aspect. The enhanced sustainability reporting requirements for Main Market listed issuers will be implemented in a phased manner, beginning with the disclosure of the common sustainability matters for financial year ending on or after 31 December 2023, and culminating with the TCFD-aligned disclosures on or after 31 December 2025. This is intended to help publicly listed companies to disclose ESG information, and to monitor to what extent they contribute to universal targets of sustainability, such as the UN's SDGs. The reporting template is required to be submitted together with the annual report. First report was submitted in 2020. The guidelines were adopted on a 'comply or explain' approach for the first three years upon implementation. 7#8Sustainability disclosure requirements in Southeast Asia (cont'd) Jurisdiction Regulation name Year enacted / Planned enacted Target Company Singapore SGX Core ESG Metrics 2021 Public listed companies Thailand Corporate Governance Code 2017 Public listed companies State-owned and Sustainability Reporting Vietnam Handbook for Vietnamese Companies 2013 public listed companies At a glance The Singapore Exchange has adopted a phased in approach to mandatory climate reporting based on TCFD based on recommendations by the TCFD. All issuers must now provide climate reporting on a "comply or explain" basis in their sustainability reports from FY commencing 2022, based on the TCFD recommendations. SGX has adopted a phased in approach, following a public consultation in 2021. Climate reporting will subsequently be mandatory for issuers in the (1) financial, (2) agriculture, food and forest products, and (3) energy industries from FY 2023 (for other issuers, climate reporting on a 'comply or explain' basis.). The same requirements will apply to the (4) materials and buildings and (5) transportation industries from FY 2024 (For other issuer, climate reporting on a 'comply or explain' basis.). Thailand's Securities and Exchange Commission issued a new Corporate Governance Code, which replaced the 2012 Principles of Good Corporate Governance for listed companies issued by the Stock Exchange of Thailand. The code requires that company boards ensure sustainability reporting using a framework that is appropriate and 'proportionate to the company's size and complexity' (Principle 7.4). Per the Thai Securities and Exchange Commission's guidelines, many companies choose to use GRI as their reporting framework. Only state-owned enterprises, public and listed companies are required to disclose sustainability information annually. Across the handbook's suggested disclosure areas for companies: biodiversity, water use and pollution reduction. Source: Sustainable Fitch (September 2023) PwC 8#9Perception gap between investors and CEOs on climate-change threat and energy transition exposure In a world increasingly dedicated to mitigating its environmental footprint, businesses are actively striving for greater sustainability. Building a better business for a net-zero world often requires tough trade-offs. Investors see the benefits of action but are unwilling to accept lower returns. Customers push companies to change but don't want to give up convenience and low prices. By several measures, investors are more concerned than CEOS that climate change will have meaningful implications for businesses. Those concerns prompt business leaders to not only act on climate, but to present a credible rationale for their decisions. By linking climate action with value creation, CEOs can provide the leadership that the capital markets are seeking. Investors CEOs Climate- change threat exposure, next 12 months 1.6x Climate- 1.9x odds that odds that investors expect greater exposure than CEOS 60% change threat exposure, next 5 years investors expect greater exposure than CEOS 60 Energy transition's effect on profitability, next 10 years 1.4x odds that investors expect a greater effect than CEOS Investor are more likely than CEOs to say that climate change will affect companies financial performance across multiple time horizon 60 50% 46% 40 40 20 27% 26% 37% 26% 21% 49% 37% 40 31% 28% 22% 34% 25% 20 27% 20 22% 14% 0 0 "highly" Sum of "Moderately" "Slightly" "extremely" exposed and and "minimally" exposed exposed Sum of "Moderately" "Slightly" "extremely" exposed and and "minimally" "highly" exposed exposed Sum of "Moderate" "very large" extent and "large" extent "Limited" extent Note: Odds ratios are based on regression analysis of two sets of survey findings. Source: PwC's 26th Annual Global CEO Survey, PwC's Global Investor Survey 2022, original analysis 81% of investors will tolerate only a small decrease in profitability in exchange for ESG actions Source: PwC's Global Investor Survey 2022 Companies and investors need to find the right balance between short-term performance requirements and the action needed to meet longer-term goals by doing four steps below: 1. Defining Your Sustainability Purpose: Are you shaping your company's vision around sustainability, or merely adhering to legal and regulatory prerequisites? 2. Crafting Your Unique Narrative: What compelling sustainability focus and strategy can you weave, one that harmonizes the interests of investors and various stakeholders with your corporate sustainability mission? 3. Cultivating Trust: Do you possess a profound understanding of investors' expectations regarding sustainability? Are you demonstrating a consistent commitment to these expectations in every facet of your operations and transparently disclosing pertinent metrics? 4. Investing with Impact: To what extent does your allocation of resources into sustainability-related investments align with solutions that wield the most significant influence on combatting climate change and securing your long-term prosperity? PwC 6#10Contact us Jasmin Maranan Advisor, Capital Markets [email protected] C Andi Harun Director, Capital Markets [email protected] pwc.com/id This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC Indonesia, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. The documents, or information obtained from PwC, must not be made available or copied, in whole or in part, to any other persons/parties without our prior written permission which we may, at our discretion, grant, withhold or grant subject to conditions (including conditions as to legal responsibility or absence thereof). PwC Indonesia is comprised of KAP Tanudiredja, Wibisana, Rintis & Rekan, PT PricewaterhouseCoopers Indonesia Advisory, PT Prima Wahana Caraka, PT PricewaterhouseCoopers Consulting Indonesia, and PwC Legal Indonesia, each of which is a separate legal entity and all of which together constitute the Indonesian member firm of the PwC global network, which is collectively referred to as PwC Indonesia. © 2023 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see http://www.pwc.com/structure for further details.