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Pelat Timah Nusantara

Pelat Timah Nusantara aka Latinusa (NIKL) is one of those companies in IDX that recorded significant increase in its net income on first half 2010 compared to first half 2009, which reached up to 480.9%, or almost 5 times larger. Because the numbers look so fantastic, then maybe some of you tempted to buy the stock. NIKL issued its financial statement on 27 July, with the stock position on 315 at that time. But why since that date, the stock didn’t go up? When this article was written, NIKL was on the position of 305.

Overall, NIKL’s performance on first half 2010 has rose quite sharply compared to the same period of 2009. Maybe that’s due to the Japan investor, Nippon Steel, that bought NIKL from its parent company, PT Krakatau Steel, at the end of 2009. Now let’s take a look at its balance first.

NIKL’s assets increase 83.0% to be Rp861 billion, where half of them are derived from an increase in equity amounted to 91.7%, from Rp237 billion to Rp468 billion. That increase in equity particularly generated from additional paid-in capital amounted to Rp108 billion. NIKL’s debt also increased, though smaller than the increase in equity, which from Rp233 billion to Rp394 billion (68.7%).

If you read the above paragraph carefully, then you will find that Nippon Steel injected the funds to NIKL mostly in form of paid-in capital, while the funds in form of debts were not so great, so the debt position was still and even lower than its equity. On first half 2010, DER of NIKL was 0.84 times (NIKL’s total debt was 84% of its equity, aka smaller). That number was better than in first half 2009 that reached 0.98 times. So far, Nippon Steel’s acquisition towards NIKL has quite positive impact for the company, at least from its balance sheet side.

Due to the increase in assets, NIKL’s performance becomes more productive. The tin plate production on first half 2010 was 58.6 thousand tons, increased 58.2% than in first half 2009. The tin plate sale also increased 37.6%. Consequently, the company’s revenue increased 131.9%, the operating profit increased 167.7%, and the net income increased 480.9%. It’s quite promising, because the increase in net income was derived from improvement in performance operationally (increase in revenue and expenditure efficiency), not from revenue in form of merely bookkeeping.

Now let us check the stock. NIKL’s net income that increased quite significantly cause its PER that was at the price of 305 to be only 6.9 times. Quite cheap? Well, it was. With the increase of NIKL’s profitability ratio, where its ROA and ROE increased respectively to 12.8% and 23.6% from only 4.0% and 8.0%, then now NIKL has quite strong fundamental. Its stock price at 305 can be said fundamentally undervalue.

So, everything looked good. Then why did NIKL’s stocks seemed wouldn’t go up throughout this August?

Although it looked good fundamentally, NIKL is only a small company with total assets of less than Rp1 trillion (small here is in term for companies listed in the exchange, which have trillions of assets in average). The company’s name is also not very popular than its holding company, PT Krakatau Steel. The stocks of small company like NIKL are usually interesting to retail investors who like to go in and out anytime, so the pattern of its stock movement doesn’t constantly follow the linear line, but irregularly, because it’s more influenced by the latest news released by the company, rather than by technical or fundamental factor. If you often read about the stocks recommendation on the media, the recommended stocks won’t be far from the bluchips’ or the LQ45’s, because those stocks movement is influenced by the technical or fundamental factor. As for NIKL’s stocks and such, they are usually only recommended based on certain rumor or information. Yup, unless in the future NIKL capable to improve its assets to be at least Rp1 trillion, then in the mean time, NIKL is not suitable for the long-term choice, because the stock is very prone (easily influenced) to the market sentiment.

And NIKL’s PBV that was above 1 times (precisely 1.6 times) had made this stock not so cheap if judged from its PBV. As for Nippon Steel, or other NIKL’ major stakeholders who wanted to improve the stock price in the near future, then maybe it can be done by increasing the paid-in capital.

By the way, the latest news from the management was about their tinplate sale on the next September would probably be decreased due to the Eid, where most of the factories of tin can/packaging as their customers (NIKL sells tin plate for raw material of cans for milk, biscuits, sardines, etc.), slightly reduced their activity, as they should give holiday to the employees who return home. The tinplate sale was predicted to be back to normal at the end of September, after the can mills operate normally.

You will probably will come up with a question: If the domestic tin mills closed, why didn’t they try to sell the products to overseas aka exporting? NIKL indeed more focuses to sell their products domestically, because the company has quite difficulties to compete with foreign tin plate producers (read here). Fortunately, the domestic market also shows quite friendly atmosphere.

Usually, if small company affected by such bad news, then the stock will immediately fall. Luckily, NIKL was supported by its strong recent fundamental, so the stocks didn’t fall, but remained at the position of 300 (in average). But to be able to strengthen, they probably need to wait until the end of Eid holiday, where the management would probably release announcement: the tin plate sell rises back along with the demand from the can mills.

If you’re being fad, NIKL is actually capable to give considerable benefit in the short-term. For example, you can enter at 300, and out at 310 in the same day. It means gain of 0.3% (not including brokerage fees cut). And because NIKL is unlikely to fall lower than 300, then the risk is also relatively small, at least for now.

PT Pelat Timah Nusantara, Tbk
Performance Rating on 1H10: A
Stock Rating at 305: BBB

IPO of Krakatau Steel

Why did I suddenly discuss about NIKL? It’s because lately, I realize that IPO of NIKL on previous year, probably was merely a pilot project from the management of PT Krakatau Steel, one of NIKL’s majority owners, to observe the market’s response. The real target was actually much bigger: The IPO of Krakatau Steel itself, which will be done at the end of this year. The pilot project through NIKL was needed, because all these times, the stock market in Indonesia was unfamiliar with iron and steel sector, and its refined products, so they worried that the investors has less interest toward Krakatau Steel.

IPO of Krakatau Steel itself could possibly become the biggest in this year, because the acquisition of funds target is also very great, which is up to US$600 million, or around Rp5.5 trillion (IPO of BRAU is nothing compared with this). As the main player in the iron and steel industry in Indonesia, PT Krakatau Steel is indeed a very great company, so its IPO will be the market spotlight. We will discuss about the prospect soon.

Original article was written on August 24, 2010.

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