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Bakrie Seven Brothers, Nowadays

During the year 2009, especially after Indonesia stock exchange awakens from the impact of global crisis in 2008, the IDX is mastered by the member of the seven brothers (B7). The trading volume of the seven stocks was so big, that from the total transaction value that happened in one day in the exchange, more than a half involving them. So that finally the movements of this B7 became a reference for investor to buy, hold, or sell. However, in 2010, the group is losing its magical power. What is going on? This article is important to be read if you hold one or two shares of B7 member.

In this month, one year ago, the trading volume of B7 member almost always about hundreds of million pieces every day, even sometimes reach billions. For example Bumi Resources (BUMI), which in one day was transacted among 300 - 400 million pieces. In certain times, its transaction volume went over 1 billion, or even 2 billion pieces. The other extraordinary example is Bakrie & Brothers (BNBR), which in the certain days, its trading volume was above 4 billion pieces! The other members of B7 such as Bakrie Telecom (BTEL), Bakrie Sumatera Plantations (UNSP), Darma Henwa (DEWA), Bakrieland Development (ELTY), and Energi Mega Persada (ENRG) were also almost transacted with the volume above 100 million pieces per day.

This illogical volatility caused the investors no longer care at the fundamental aspect, which was the performance of the pertinent company, and more targeting on the short term profit which could probably be got if the share of B7 members, especially BUMI, can jump several percent only in one day. And it is actually happened in the pasr.

But now, its golden age has elapsed.

If you look closely, during 2009, stock of BUMI or the other members of B7 would only gaining sharply if its trading volume was a super big. However, if its volume was small or at least equal to the other stocks trading volume in general, then the stock would slowly go down. So, if the stocks of B7 seems attractive because it went up and went up again during 2009, actually it just because it designed to be seeing like that. They could go up only because the work of the dealer who twirling their hundreds of million of their stocks. Otherwise (if its transaction deserted), they would go down naturally. How come? Because its fundamental is zero! There was only one member of B7 who has a good performance. But the member was actually noted a significant decline of net profit in the last full year 2009, so that its stock price would be stagnant and never go up again. That member is BUMI. How about the other members of B7? Yeah, I can say that it is a lucky that they don’t incur losses.

In fact, since the beginning, there was no serious investor who wants to buy B7 stocks because they knew that they cannot expect dividend or real capital gain from the stocks. The investors which entered B7 stcosk during this time were short term investors (or speculators, to be real) who were dazzled by B7 liquidity in mastering the exchange. They do not realize that if the chef of B7 leaves his kitchen, the the stocks would declining.

Unfortunately, it is happened. Nowadays, Bakrie Group chooses to ‘rest’ from the stock exchange for a moment. I don't know what causing Bakrie and its group becomes busy outside the exchange, but it is clear that the trading volume of B7 in the last three months was no longer multitude (so that its stocks starts to go down). In addition, some works which should be done by the members of B7 were neglected, for example the problem of acquisition of Domba Mas which is uncompleted by UNSP. Even if there is one of B7 issuers who still got a little notice, it should be ELTY. ELTY was the first member of B7 who announced its first quarter of 2010 financial report. Based on the financial report, ELTY booked an increase of the net profit about 6.5%. However, it is clear that the increase is not enough to boost up the stock. Why? The total asset of ELTY is about Rp12.5 trillion whereas its net profit (if annualized) merely about Rp112 billion only, too small!

Just a few minutes ago, ENRG has also released its financial report of the first quarter of 2010. The result? Still loss, even worse than the previous one. If at the first quarter of 2009 they noted loss about Rp18 billion, this time it is increasing to Rp22 billion. Their revenue also decreases from Rp349 billion to Rp257 billion. This is not good.

Then, is there any possibility that B7 will return to go up in the near future? At least one among the members?

That’s difficult to be answered because I do not know Bakrie. If I know him, I will ask, ' When you will back to the kitchen? It’s a pity that the investors have been waiting for you'. What I mean by this is the increase of B7 almost fully depends on Bakrie Group as the owners and also the stock dealers. If they return to the stock exchange and again traded BUMI and other members of B7 with billion piecess of trading volume like what happened last year, then automatically B7 will strengthen. In contrast, if they let the transaction of B7 remained silent like this, it is difficult to see an opportunity that B7 will return to go up.

In fact, our economics condition today is quite good so that in general, the shares in IDX have a big opportunity to strengthen, unless if the pertinent shares have a bad performances. If you can bear with it, you may wait until the chef of B7 return to the kitchen. If you are not? May be this is the moment of cut loss. Be patient, profit and loss in the capital market is an ordinary matter.

I see that BUMI (only BUMI), still have an opportunity to go up if we see their operational report which notes an increase of coal sale at 41.6% in the first quarter of 2010. However, to be sure, we will analyze its first quarter financial report of BUMI which will be announced in the end of May.

Original article was written on April 30, 2010

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