Asia Natural Resources

If we take a look at the market lately, I wonder why there’re so many rumor about certain stock that is associated with mining sector. For example, PT Nothing Company will acquire a coal company, and so on. Then, the related stock is said to be pulled by the stock maker in certain position. The most frequently one that has deceived many people is Bhakti Investama (BHIT). However, BHIT is not the only one. One of the stocks that become a lively discussion  lately because it is said to be engaged in the mining business is Asia Natural Resources (ASIA). Hmm…whether the prospect real? Or it’s merely just the work for fun aka speculation?

ASIA was suddenly famous since late May. It was started on 21 May, where the rumor said that ASIA would cooperate with the strategic investors from Singapore. AISA was also mentioned would get the mining license in Bombana Regency, Southeast Sulawesi. Apparently, ASIA did not rise because of the rumor, instead of fell down from 101 to its lowest point, which was 84 on 25 May.

Actually, it was not just a rumor, but a fact. Long before that, on 6 May, ASIA has officially stated that they had have (not 'would')  permission for nickel mining in Bombana, with reserve prospect of 70 million tons nickel, for their subsidiary, PT Tekonindo. The problem faced by ASIA then was financing, where the production cost of nickel is of course very expensive, and they did not have the money.

Because of that information, ASIA’s stock directly rose from 92 to 99 on 10 May, but then it fell again. On 17 May, ASIA rose back up from 93 to 107, but once again, it fell back. Even though the information about ASIA’s nickel mining started to spred to the public on 21 May, ASIA continued to fall down until 25 May. The cause is obvious: at that time, JCI faced correction in May, so that such rumors was ignored by the investors who still took the ‘wait and see’ attitude. Then after 25 May when JCI stopped descend, the investors eagerly jumped into the market, and ASIA immediately soared.

ASIA’ increasing just stopped on 4 June, when JCI stopped rising as well. At that time, ASIA has rose from 84 to 161 or about 91.7%.

Since the rumor emerged on 21 May, other rumors were continue to emerge. On 1 June, there was a rumor about foreign investor from China (or Hongkong?) who would buy ASIA’s stock. The next day, ASIA mentioned will increase to 600 because after nickel, ASIA would explore other mining commodity business such as gold and silver. On 9 June, when the stocks have started to descend back, ASIA stated that they would cooperate with a coal company, although still unclear which one. All these rumors was still incapable to make ASIA back to position of 161. Why so?

It is because some of those rumors were not true, and exaggerated. Here’s the actual information, which was released by ASIA’s management: 1. An investment company from Singapore, Trust Bearing Investment, bought 35% of ASIA’s stock, and gave funds amounted to US$115 million for mining in Bombana, where the funds were obtained from the issuance of IOU (debts). 2. PT Tekonindo would immediately perform production activity, only it has not specified when. 3. The company tried to look for mining company to be acquired, yet still has not find it. 4. The company would held its general meeting of shareholders and public expose at the end of June.

The conclusion?

The story about nickel mining in Bombana was indeed true. But other than that, all was just rumor. The problem is, that nickel mine project requires huge capital. Up until today, ASIA had just got one strategic investor that already inject the fund amounted to Rp1 trillion, which was derived from debt. However, ASIA was pretty confident and would use the funds to acquire a mining company. Surprisingly, they would acquire a coal company, instead of nickel, like they have stated. So what the hell are they doing?

Then what about ASIA’s performance?

In general, the performance of ASIA is mediocre, not great but also not too bad. Only the company is considered very.. very small. In first quarter 2010, its assets was Rp69 billion and recorded net income of Rp1 billion. But there is one point to watch out here, where ASIA has quite large deficit, which is Rp344 billion. I have not checked it yet, but there is possibility that this company recorded a really bad performance in the years before.

Anyway, maybe this company will be like Delta Dunia Makmur (DOID) which was suddenly prosperous after entering the coal sector. But honestly, the nickel sector is not as promising as coal, where nickel’s price is relatively low today, and it’s hard to predict whether it will rise or descend. Maybe that’s why ASIA’s management released unrelated statement by stating that they will acquire a coal company instead of nickel.

What about the stock movement patterns? Because this article is already quite long, so I will explain about it briefly: ASIA is quite often rising abruptly as it did last May, but then continued to move down in a long time, before then suddenly rose again dramatically. And it continues throughout the year.

The final conclusion? Well, why don’t you conclude it yourself?

Original article was written on June 17, 2010