ELNUSA - ELSA

Macro economy in Indonesia

The Central Bank expected GDP growth in 2013 is approximately at 5.5 % - 5.9 %, this is lower than economic growth in 2012 which is at 6.2 %. BI Rate at recent is at 7.5 %, it has been increased from 5.75 % in December of 2012, BI seems continue in conducting tight money policy until the elections end at 2014. Central Bank expects that GDP growth in 2014 will in range 5.8 – 6.2 %.

The quality of economic growth has to be prior concerns. Who are growing reach and who are downing poor?  Some strategy has been done such as direct cash support for the poor citizen who has been done in the last three years.  Each person was given cash amounting to IDR 300 thousands rupiahs.

Meanwhile Organization for economic and Development (OECD) in last October that Indonesia’s economy would grow at an average growth of 6 % during the period 2014 – 2018. I think the prosperity of Indonesia is still questionable; it depends on the elected president who will determine policies as the one of key driver of the advancement.  In other side, the nation gets several volcano disasters at few places, so far it does not ruin significantly. 

Based on the data at the last three years, proven reserves of oil in Indonesia tend to decline. Inversely with proven reserves of gas, it tends to rise. According to ministry of energy and mineral resources the energy supply in 2012 amounted to 1,776 million Barrels. The petroleum based fuel is 13.83 % of total energy mix and the Natural gas is 23.18 % of total energy mix. Natural gas will be more dominated than oil in the future.

In 2012 Indonesian upstream oil and gas business executive board is dissolute by the constitutional court based on its resolution no. 36/PUU-x/2012 on 13rd November 2012. The government made new council, the Provisional Executive Work Unit (SKSP Migas). That event did not affect all contracts which are called as PSC as existing contracts.

Key Driver

The contracts of Pertamina are the main source of revenue.  Pertamina has 41 % share of PT. Elnusa. Pertamina is Oil Company which is owned by government and it has many oil and gas projects in Indonesia. The growth of the company depends on performance of pertamina. Pertamina also has many affiliates such as Patra Niaga, pertamina E & P, pertamina hulu and etc.

In 2011 – 2012 the company performs its growth with 1.3 % up in its revenue. The slow growth is affected by the number of oil and gas projects in 2012.

In 2011 -2012 the company has available cash more than 10 % of its sales. It means the company tends to allocate the cash in to the Bank as time deposit, call deposit and saving account. It seems they has no new project yet which need fund to be allocated in.

I adjust that the company will able to increase its sales with the same growth because there are no new reserves found. Its revenue will come from repeated order from existing project..

               

Semen Indonesia - SMGR

Semen Indonesia

Strategic Holding company as its business strategic 

Semen Gresik Group has already changed its name to be Semen Indonesia in 2012. The company was established in 1953 as NV Pabrik Semen Gresik. The company runs its business in cement industry at Indonesia and Vietnam. The company has several cement plant in Gresik, Tuban, Indarung, pangkep and quang ninh in Vietnam. The major shares holder as its controller is government of republic Indonesia.

In order to advance its growth, semen Indonesia is made as  company holding of companies under the Semen Gresik group includes semen tonasa, semen padang and semen gresik.

With this strategic holding company, the company will increase its value, reduce operating costs, strengthen its brand equity, increase capacity and expand to south East Asia such as Vietnam.

Financial condition

In 2012 revenue increases 19.7 %compared in 2011. The increase is caused by better volume of cement which had been sold. The volume of sales is up 40,9 % higher than 2011. The increase in sales is followed by increase in net profit, it is 23,5 % higher. The company has very strong position in market; it has 41 % of market share of cement industry in Indonesia. The position is stronger with additional plant which could increase its capacity. The company built 2 plant and buy new company in Vietnam in 2012.

Higher revenue with higher profit means the company could make better sales with better profit margin.

But there was a question about increase of its intangible asset from IDR 4.8 billion to IDR 1 trillion in between 2011-2012. This is the massive increase. The big portion of this increase comes from license and trademark of Thang long cement of Vietnam which has been bought in 2012.

In 2012 the day receivable is 38 days slower than 2011 which is 33 days. The same happen with its Days inventory which is become slower in 2012 compared to 2011, but its cash to cash cycle is faster, which is at 64 days compared to previous year which is at 83 days. 

Forecasting

I estimated increase of revenue in 2013 is at high growth rate after purchase thang long cement in Vietnam with 19 % up, I think the real sales of 2013 has been appeared, it is just my estimation based on economic situation in 2013 which is has lower growth of GDP than 2012. In 2014 the economic condition may be at lower growth because of election of president and senate. We need to watch interest rate, inflation and economic growth in Vietnam.    

Key Person

Dwi Soetjipto has already done his job as CEO since 2005. He joined semen padang in 1981, his previous job is as CEO of semen Padang. Dwi Soetjipto has doctoral degree of university of Indonesia.  He got great experience in cement industry since 1981. Within his expertise the new holding company will be able to advance its value more at the future.

My opinion

My analysis needs more improvement especially in its depreciation rate in 2011. Increase of fixed asset  (gross) in 2011 – 2012 is IDR 6.18 trillion.

Domestic Cement Consumption analysis in Indonesia

As the economic growth of Indonesia in 2013 which is below its growth in 2012, the cement consumption of Indonesia will increase slightly. Based on simple statistic the increase of cement consumption has strong correlation with economic growth.

The industry of cement and non metalic sector has average increase at 12 % in 2006 - 2010.

 

With simple moving average method, we could calculate, the growth of domestic consumption in 2013 is at 7.8 % compared to 2012 by using data of cement consumption in 2008-2012.

In 2012 the domestic cement consumption is 55 million tons; it increases 14 % higher than consumption in 2011 which was 48 million tons.

Within stable condition and strong domestic consumption the cement consumption is expected increase in the future.  The challenge is rupiah currency, it can stumble cement consumption. 

Several projects that I think affect it are toll projects. The demand is high based on Master Plan for acceleration and expansion of Indonesian economic development (MP3EI) through 2014 which the 19 % total investment is in infrastructure project. 

The several strategic projects which held by government are Trans java connecting Jakarta – Surabaya, Trans Sumatra and trans Sulawesi. The total length of the toll road projects is 3670 KM.

Compared to other countries in Asia such as china, Indonesia is slow.

ICBP

Economic growth of Indonesia in 2012 is at 6.5 % higher than 2011. In 2013, the government projected the economic growth at 6.4 %. Despite rupiah currency decline to US dollars, Government still believes that this country has strong fundamental of macroeconomic. GDP is dominated by local consumption of more than 240 million people. And that will make several industry such as food, beverage and tobacco is still growing by demand from inhabitant of this country. Since 2006 until 2010, this sector has been growing with average growth at 21 %.

i think government must take action to face decline in rupiah exchange rate to US dollar. For example, rupee of India which has same problem, the government of India plan to increase their government spending for infrastructure projects in order to save their economic.

Indonesia's government actually has done several actions in facing the currency problem; they did swap agreement with South Korea and China amounting to US 40 billion to make rupiah stronger. They also increase government spending for developing and opening sixty thousands jobs for younger age (50% of total population) in its departments and local governments at entire nations. It will make domestic consumption stable. With those actions, i think it is still difficult to reach 6.4 % growth as the target; they have to increase BI rate again, do tight money policy and investing more money for Infrastructure projects. Those are just my opinion. 

ICBP ( Indofood Consumer Branded Product Sukes Makmur, Tbk )

Indofood CBP (Consumer Branded Product) sukses makmur Tbk is established as a separate entity in September 2009 and it did initial public offering in Jakarta Stock Exchange in 2010.  The company is a part of group of indofood which have various business segments in food, beverage and palm oil from downstream to upstream. This entity operates in packaged food and packaged beverage for all age.

The products of ICBP have five segments: noodles, Dairy, Food Seasoning, Snack Food and nutrition and special food.   

The 3 biggest segments in contribution of revenue of each are 69 % for noodles; 18 % for dairy and 6% for Snack Food. 

For instant noodle, compared to Thailand, Singapore and Japan, Indonesia has bigger market size and it is still growing. Since 1999 until to 2009, the instant noodle increase 40 % larger, from US 2,221 million up in to US 3,191.4 million. i projected the market size will increase at US 3,600 million in 2013, that means instant noodle is still having good opportunity to grow.

The instant noodle products of ICBP are supermi, indomie and sarimie. The strongest competitor for instant noodle is Wing Food with its Mie Sedap. Based on the data above the number of player in instant noodle is increase from 2001 at 57 players become 84 players in 2005.

ICBP need more innovation to create new product and defend its market share, especially in instant noodle market size. I think the company has to do more in anticipating price of its essential commodities, wheat. for example in this recent condition, the commodities rises in its price because of the weaken currency of rupiah to US, the company must pay more to buy material for its production. Although the export has been doing for several years but i think it is not significant in number. 

in spite of the ICBP is supported by its affiliate, the biggest wheat flour mills in the world, Bogasari, The company still need to innovate in others product which use more local commodities such as rice, cassava, potato or others commodities from the sea. Or it does acquisition of plantation in Europe to produce wheat. Diversification or vertical integration, two options which is good for the future.   

For snack food segment, the sales contribution tends to increase from 2009 until 2012. it need more concern and investment in promotion and research to increase revenue.

For Dairy food, its sales contribution is stable, at 18 - 19 percent. People in indonesia preferred to consumes instant noodle because of cheaper price to alternate rice which is more expensive. 

I conclude that ICBP need more investment to enlarge their market size, especially in non noodle product such as dairy food, beverage or others. There are a lot of cash and cash equivalent in 2010 until 2012. ICBP has just done its IPO in 2010, the company may still wait for good momentum to invest. with its liquidity the company could invest new factory or acquire existing brand from another competitor or doing vertical integration, such as buying another distributor company or buying packaging / plastic producer. I don't know its management plan for its future. If the company will late in taking action, the competitor will take chance to expand, I remember when wings food expand its food division with mie sedap.  ICPB produce mie sedaaap to face wings food. 

The investor need to analyze its activity ratio, profitability ratio  and others financial ratio to ensure that the company will be more profitable at the next three years. Transaction with relate parties is needed more concern. 

The company have several creditors, those consist of Bank Mandiri (working capital loan and overdraft loan), ANZ (Trust Receipt for import ), BCA (MML and working capital loan).

In 2009 - 2012, cash and cash equivalent increases from 695.8 to 5,484.3 meanwhile net cash flow from investment activities increases from 307.6 to 1492. The net fixed asset also increases from 2180.4 to 3,839.8

The net sales in 2012 increase 11 % higher than net sales in 2011. Net income of 2012 is higher than 2011, it grows 10.4 %.

I make estimate the company will grow 10 %higher in 2013 based on average growth at the past four year if there is no merger and acquisition in recent year.   

Link and news :

Indofood CBP acquires Club for Rp 2.2 trillion

http://www.thejakartapost.com/news/2013/11/16/indofood-cbp-acquires-club-rp-22-trillion.html

The PCIB Acquisition completed

http://www.indofoodcbp.com/corporate/InvestorRelations/PressReleases/tabid/130/articleType/ArticleView/articleId/84/language/en-US/THE-PCIB-ACQUISITION-COMPLETED.aspx

Board of directors

http://www.indofoodcbp.com/corporate/en-us/ourcompany/management/boardofdirectors.aspx
 

SOLAR CITY

Solar City : Green Energy Start Up with steady COST of energy

How is the best way to make analysis for start up?. Green energy industry is a new concept in mass industry. In 2008 Barrack Obama in his campaign announce his 5 million green jobs program. The program is consisted of several research in renewable energy, Fossil fuel, Electricity infrastructure and also low emission energy research. All of those programs are conducted for supporting green energy industry.

By 2015, based on solar trend, the industry is predicted growing 38 % based on my forecasting with average point to point estimate from 2000 - 2012. I think solar energy will grow fast because oil price is complicated and having too much leverage to global economy. 

we can remember oil price change when Libyan people was agitated by facebook and what was happen to oil price when Egypt was disorder because of its political issue.

This kind of industry will change everything, at the future people may prefer to live at tropical country because its energy cost is cheaper and the weather is comfortable.

Gas Vs Solar Energy

Gas will rise its price when the demand is more than its supply. The supply can be arranged by big oil companies as the major player and it will not be steady in its price. Meanwhile solar energy depends on the local weather and global climate. It is difficult to be controlled by human or market player. This is steadier.

In the past eight years, installed solar capacity is exceed 1500 %, from less than 1 Giga watts to more than 15 Giga watts.

I think Solar city was exist based on same vision with government campaign in create green energy to make thousands jobs opportunity. Co Founder of solar city is Lyndon R Rive. Solar city offers product and service which relates with solar energy. They said that in every five minute they get new customer.

Lyndon set the business in to product and service. The products are solar panel and inverter with some kind of software and tool which helps clients to monitor their energy consumption, such kind of energy evaluation which could be seen loss and efficiency in its useful of energy.  They did Campaign that their product is able to reduce energy cost until USD 50 each months compared to conventional energy. They also provide service and monitoring for existing customer in order to make money in customer engagement. The company also provide energy storage product for customer.  

They also create electric vehicle charging station for serving electric vehicle, they have corporation with tesla in this project. Elon Musk, CEO of Tesla is also hired as Chairman in Solar City.

Customer could buy either with energy purchase agreement or solar energy lease. Both of those are paid in monthly payment. The lease contract is at long term payment, 20 year lease.

US states commonly has 4 seasons with unsteady weather, the use of solar energy can be optimum at dry, summer and autumn.      

Customer

Residential : The homeowners who are spread on California and Maryland are included in this kind of customer.

Government: US air force base; School district

Commercial:  Walmart; City of Lancaster; home depot etc

Future Project

The company announces  its plan of  project financing amounting to USD 1 billion for military housing from Bank of America Merrill Lynch.

I made its sales forecasting based on Global data at above with 40 % growth. This start up company has been loss in these several years. But it has huge cash amount, that means the investor still believed to this business model. They trust to the company, they think at the future the company will keep growing and will be more profitable.