PAKUWON JATI - PWON

Industry

According to bps in august 2014, the monthly average expenditure per capita for housing and household facility in 2013 slightly increased about 7 % compared to 2012. The demand for housing is still stable and the real estate industry continues to grow larger. As the result of this, several company related to real estate industry earns higher income, for example agung podomoro land, ciputra surya and pakuwon jati.

Regulation:  Low Loan to value ratio and high interest rate

In the early of January, central bank announces its rate still stays at 7.75 %, the interest rate for home financing is predicted as the same rate. In addition the bank credit in September 2014 declines compared to September 2013. Despite high interest rate and tight loan to value, the demand of real estate product and property rent still advances.

Colliers International Asia real estate forecast of 2014 has a prediction that the office rent will increase 30 % up compared to 2013. The growth of office rent in 2013 was higher than 2014, it was at 37%. The decline in supply of office space was caused by lower exchange rate rupiah to us dollars.

Loan to value regulation was revised with several points which tend to prevent investor to do speculation in property investment. It charges lower loan to value ratio that could force investor to spend more cash from own source.

Based data from central bank in 4q2013, among of the projects of real estate companies are financed by their internal cash. Bank loan is only financed 29 % of total project. Higher interest rate of bank may not affect too much in the sector. 

In conclusion, real estate industry still has good prospect as the demand of real estate is growing.

PWON – PAKUWON JATI

Share holder

The biggest share holder is public with 47 % of total share, the second and third consecutively is Burgami investment limited and Pakuwon Arthaniaga.

Key driver

The key successor of revenue growth in 2013 is kota kasablanka mall project. The revenue in 2013 increased about 39 % compared to last year. According to annual report revenue contribution of shopping mall and office rent are about 42 % of total revenue. The second biggest contributor is hotel segment with 41 % of total revenue in 2013.

The space rental of office space and shopping mall are the main contributor, the company seems concerning in development of superblock which provide shopping mall and office in particular area.

The property portfolio are kota kasablanka mall, tunjungan plaza I, tunjungan plaza III,tunjungan plaza IV, east coast center, Gandaria city mall, tunjungan plaza V and etc.

The company has gross margin at 63.5 % of total revenue in 2013, it is better than gross margin in 2012 which is at 62.2 % of total revenue. It is higher than 5 years average gross margin which is at 48 %.

The company has surplus of its cash flow from operation, in 2013 the cash to sales ratio is at 70.2 % which is higher than cash to sales ratio in 2012 which is 60.7 %.

In 2013 the company is able to improve cash cycle which means the company could run the business more effective. 

In addition, the company is capitalizing borrowing cost in project of kota kasablanka mall and tunjungan plaza v.

Recent project

Accordance to annual report land & building under developments are Grand Island, Edu City, Palm beach, TP 5 and etc. The future project is tunjungan plaza vI at east java which will be started in 2015. And Kota kasablanka mall will be finish in 2015.  

Forecast

It is used the 5 years average growth industry which is on 21 % revenue growth (source : reuters). The same net additional of fixed asset, cash cycle, gross margin and etc with 2013 is implemented for 3 years forecast.

MERCK INDONESI - MERK

5.8 % target of economic growth and 7.75 % BI Rate

In the early January of 2015 government announced target of economic growth in to 5.8 %. They seem very careful and they decided to not increase the target. On other hand, government reduce fuel price with fixed subsidy to reduce inflation rate which was advanced after they allocated the subsidy.

Infrastructure project may need several processes such as opening the tender of the projects, project financing for the contractor, land acquisition, feasibility study and etc. These processes may need more time and more costs. As a result of this, the infrastructure project will be started in second semester, the impact of infrastructure project to economic growth may not optimize in 2015. Based on local news, Government provides budget for the projects amounting to IDR 48 trillion in 2015. The budget for fuel subsidy was over than 200 trillions rupiah, it means government is able to develop other sectors with the allocated fund.

In addition, central bank announced BI rate is still at 7.75 % which means the interest rate of bank loan will not decline. According to world bank, there is a decline in bank credit amount in septemper 2014 compared to september 2013.

Industry Analysis

Chemical and chemical product grows steady

In second quarter of 2014, the industry increased slightly in 2.11 % q to q, it was decline compared to industry growth of first quarter which was at 4.9 % q to q. In addition, industry growth in 2013 was 6.65 % up than 2012.

Pharmaceutical, Medicinal chemical, Botanical Product industry: production falls in 2^nd quarter in 2014

Based on BPS the production of the industry in second quarter of 2014 is falling -6.65 % down q to q. The demand of pharmaceutical product such as drugs is difficult to forecast.

Accordance to International Pharmaceuticals Manufacturers group (IPMG) indonesia is one of fastest growing pharmaceutical market in Asia.  Pharmaceutical industry increase 12 % in 2013 in spite of decrease in gross domestic product of indonesia.

In conclusion, both industries are still growing steady although there is a decline in economic growth.

Merck Indonesia: Prescripton drugs as key success factor to advance growth

The company is subsidiary of Merck Holding GmbH, Germany. It has 74 % of total shares; the second biggest share holder is Emedia Export, a German company.

Merck Indonesia runs it business in pharmaceutical product such as consumer health and prescription drugs. The company also has chemical product division for pharmaceutical industry and Chemical industry. 

The key driver of revenue in 2013 is Merck Serono segment, a prescription drugs product. It is 46 % of total revenue in 2013, the second biggest contribution is Chemical product division. Merck serono is the market leader in indonesia.

The highest growth of revenue in between 2012 – 2013 is Merck Serono segment which increases 35 % up. One of new products in merck serono division which was launched in 2013, it is called Glucophage, drug for diabetes therapy.

Total revenue in 2013 increases about 28 % up than revenue in 2012. The company has cash to sales ratio at 15.4 % in 2013 due to surplus in cash flow from operating. It also has stable gross profit margin in 2012 and 2013, consecutively 46.3 % and 46.1 %.

The company seems changing its credit policy for clients, days receivable is longer, it is 42 days in 2013 compared to 2012 which was 27 days.

In conclusion, the company seems capable in advancing its growth in the future, mostly its prescription drugs which is having good reputable brand for therapy such as diabetes, cardiovascular and etc.

Forecasting

I used same growth of 2013 for revenue growth in the next three years which is 28 % up as Merck serono division is a market leader and based on IPMG, indonesia’s market is one of fastest pharmaceutical industry growth in asia.

Although it is higher than its five years industry growth, 12.66 % (source :reuters).

I used the same ratio with 2013 for next three years, profitability ratio, activity ratio and net additional of fixed asset. 

TELKOM INDONESIA - TLKM

Industry Analysis

Telecommunication Industry

There are several operators in telecommunication industry; they are Telkom, Indosat, XLaxiata, Esia and Smartfren. Indonesia has good potential factor for its industry, based on BPS it has about 249 millions population in 2013. 50 % of total population is under 30 years old which is in productive age. Other positive facts, indonesia has 22 % internet penetration and 15 % smartphone penetration. In conclusion, within good purchasing power on US$ 4,540 GDP per capita, Telecommunication industry is still promising for investor.

Rapid Technology Change and Price War

Technology is one of key success factor in this industry; the upcoming technology in recent year is 4G LITE for GSM operator.   Once one company implemented newest technology another competitor would enforce the same technology to compete. For prepaid product, subscriber tend to be sensitive to price. Consumer figures out the cheapest price for the same service. That is why the price war occurred and the existing company has to combine strategy in product differentiation and cost leadership in order to meet the consumer demand and win the price war.

In 2012, the SIM penetration is at 100 %, there are many people may possibly not be served yet. According to Merrill Lynch industry revenue grew more than 1.5 times between 2007 – 2012 and Mobile subscriber base advanced about 2.6 times at the same period.

Operator with less economic of scale should give up and they could join with another existing company to win the competition. In 2014 axis was acquired by XL axiata and the recent issue, Bakrie Telecom consider doing merger with smart fren to strengthen its position in the industry.  

According to Frost and Sullivan analysis, 10 levels of the way to communicate in today, twitter is the first, then second is facebook status.

Direct talking is at the bottom of the 10 levels, that means people tend to communicate in social media where people could interact with many people.

Mobile broadband may possibly be next big market in the next several years. The user would rather like to use operating system which provides services in social media, messenger and internet browser.

The situation is happening because the previous technology 3G provide slow connection for video streaming. So people could only interact with their groups through messenger or social media.

With 4G technology, the streaming service will be more preferred with faster connection and people is able to communicate with many people through video communication.

In my opinion, there will be more video streaming application in the future. Microsoft has product of hologram technology, they use it for communicating, gaming and working but for hologram, it may possibly come once operator could provide more sophisticated service.

Broadband subscriber grows sharply

In 2013 the company had expanded to overseas, they established their business in 7 countries; they consist of USA, Taiwan, Malaysia, Myanmar, Australia, Timor Leste and Hongkong. They used name of Telin ( telecommunication Indonesia).

Telkom is owned by government of indonesia with 53.14 % of total share. It is also listed in NYSE index in
USA.

Telkomsel as its subsidiary has 42.4 % of total market share, exceeding indosat and XL axiata, it is a market leader in its market. Telkomsel claimed that they have 131.5 million subscribers.

Mitratel as its subsidiary has more than 71.000 BTS in overall indonesia, its infrastructure is key success factor in enhancing service for subscriber. As a result of this, their service is available in almost all villages in indonesia.

Based on its annual report, the key driver of its revenue is personal segment which is at 71 % of total revenue. The second is corporate segment at 21 % of total revenue.

Revenue in 2013 increase at 7.5 % up than 2012, the gross profit margin slightly declines from about 78 % in to 76 %. The current ratio is stable at 1.12 ether in 2012 or in 2013. It means that it is liquid, it has a lot of cash asset both in 2013 and 2012, its cash to sales ratio is 17.7 %. The biggest portion of current asset is cash.

The company could increase subscriber for flash product at 56 % up in 2013 compared to 2012. For cellular broadband such as kartu halo and simpati, kartu as, it increase only at 5 % compared to last year.

As the market leader in indonesia, Telkom indonesia is promising company in indonesia, government as the shareholder supported it to expand to become larger.

Forecast

I used assumption at 6 % growth, it is above the industry average growth which is 5.9 %. In addition, the average growth of sales in last 5 years is at 5%. The company has allocated its fund for investing in 7 countries and it is predicted allocating more investment at abroad in 2015. 

SURYA ESA PERKASA - ESSA

Industry Analysis

Gas Industry: Rapidly growth since 2007

Based on the data ministry of energy and mineral resources, the gas proven reserve is about 104 – 112 TSCF between in 2008 to in 2012. Natural gas is produced from several local field such as Masela, Mahakam, Natuna, west natuna, Jangkrik and Jangkrik North east blocks.

Based on Pertamina, the LPG production is beneath its demand in 2012. In that year the demand of LPG is 5.3 million MT, It is only 50 % of total demand. The rest is imported from oversea to fulfill local LPG demand. 

The gas industry was rapidly growing after Government had made energy conversion program, conversion of kerosene in to gas in 2007. As result of this, the gas industry continued to advance from 1.69 million MT to about 5.3 million MT in 2012.

For 3 – kg gas container, there is still a subsidy from government; the price is reachable by the consumer, mostly the household. The subsidy has been given since conversion program in 2007.

Government changed its regulation in natural gas trading; there will be natural gas pipe for household consumption in 2015. According to local news media, the project will be conducted by PGAS. On other hand, MRT in capital town has been using gas as its fuel and there are several gas stations in Jakarta. There may possibly more gas station for vehicle in the future.

In conclusion, the Gas industry is promising segment due the supply of LPG is below the domestic demand of LPG. The industry will continue to expand as the Natural Gas demand will be predicted to increase at the future.

Financial Analysis

This is a Natural gas refinery and processing company which has corporation with state owned oil and gas company, pertamina. The company is owned by Trinugraha Akrajaya Sejahtera with 30 % of total share, Ramaduta Teltaka with 20 % of total share, CLSA with 10 % and public with 40 % of total share.

Giribaldi Thohir, a local conglomerate, is the president director of the company. The company attains its gas supply from related parties, PT Ogspiras Basya Pratama (OBP). It has gas purchase contract with pertamina. SEP supply LPG for pertamina which is arranged in such LPG purchase agreement in particular period of time.

In 2012 the company spent a lot of cash for professional fee due to its expansion of LPG plant. Enerflex ltd was appointed as the supplier of machine and was providing services in 2013. The operating expense to sales ratio in 2012 was at 41.7 % of sales. Then in 2013 the company could reduce operating cost to sales ratio to 20.5 %. 

The company has only one business segment, it is LPG refinering. LPG product is the biggest portion of total sales in 2013 which is about 89 % of total revenue.

Large Cash to sales ratio and big contract from Pertamina

Cash to sales ratio in 2012 is about 53 %, it is lower than cash to sales ration in 2013, which is at 85 % of total sales. The company is surplus in the last several years; the LPG contract with pertamina is the main income of its business. The company enjoys the conversion of kerosene in to gas program from regulator.

Instead the cash cycle days in 2013 is slowing down than 2012, it could increase its sales at 6.9 % growth in 2013. The gross margin increases slightly from about 70 % in to 71 % in period of 2012-2013. The net profit margin of 2013 has also improved than 2012 as the company reduced operating cost. It is lifted up from 13.2 % in to 29.7 % in between 2012 – 2013.

Forecasting

As the economic growth in 2015 is predicted better than 2014, the gas consumption will continue to hike. According to Bloomberg the gas and oil consumption in 2004 – 2013 has average growth approximately at 7 – 8 %.

The sales growth consumption is taken at 10 % in 2014 as the company increases its capacity 55 % up from 36.300 MT per year in to 56.100 MT in 2014 and the demand of gas is above its supply. Revenue growth at the next two years is assumed at 10 % up.  On other hand the CAGR of LPG consumption is at 25 % in between 2007 – 2012. 

The activity ratio is assumed at the same rate with 2013 so do profitability ratios, other CA to sales ratio and other non CA to sales ratio.

The company is presumed spending its fund to expand its capacity with additional equipment and machine valued USD 20 millions.