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Unilever Indonesia

In IDX, only few companies who can record sales equal to or slightly above its assets’ value. But Unilever Indonesia (UNVR) was able to record its sales value of at least twice of its assets’ value, and that record is consistently stable every year since 2004 without even ever declining! In addition, that outstanding performance continues until today. In First Quarter 2010, UNVR recorded sales of Rp5.0 trillion, which if it is being annualized, it becomes Rp19.9 trillion. Then what is the value of UNVR’s assets? Only Rp8.6 trillion.

If we look at the balance sheet of UNVR, we will find a very different picture compared to other companies' balance sheets. Those UNVR’s Rp8.6 trillion of assets consist of debt amounted to Rp3.9 trillion and Rp4.7 trillion of equity. From those debts, all of them are considered as operational debt, such as business debt, tax debt, accrued expenses, etc. (which can be summed up as healthy debts). UNVR doesn’t have debts that could potentially undermine the company's net profit in the future or disrupt stability of the company’s balance sheet such as bank loans, bonds, sub-debt, etc.

What about the equity? Don’t be surprised if UNVR’s capital base that is generated by depositing their capital base amounted to 7.63 billion of shares was only Rp76.3 billion (Rp10 per share). Most of UNVR’s equity is derived from its retained earnings in its last position of Rp4.5 trillion, which is generated from their net income, which is constantly increasing from year to year (so the capital base that is currently held by UNVR is really just derived / generated by operational activities of the company itself) . UNVR's equity rose 20.8% in First Quarter 2010 compared to the same period of 2009, which is 100% caused by the increase of its retained profit.

UNVR’s profitability ratios are the highest along my researchs on the performance of the listed companies’. In First Quarter 2010, UNVR noted 45.0% of ROA, and 83.2% of ROE. It means that the company only needs a year for a turnover (and indeed UNVR had a turnover since a long time ago). UNVR also included in the listed companies that consistently give out its dividens in quite large portion (on average, over 50% of its net profit every year). Amazingly, despite their ‘generousity’, the balance of the company still looks good.

UNVR is the type of company who ‘talks less’ (or rather promoted) to the media about things like 'UNVR targets certain percentage sales growth in 2010', or 'UNVR plans to expand by acquiring such and such', and the like. The news that came out from UNVR management is almost always about the thing they have done, not the one they plan. For example, in the latest important news, UNVR has acquired (not planning to acquire) PT Sara Lee Body Care Indonesia, which some time ago delisting from the stock exchange.

UNVR is also hardly never (or never at all?) announced that they will seek debt for their capital expenditures, or issue bonds, or right issue, and the like. The company seems pretty confident to always raise the value of their capital and their equity value in usual method, and without the need owe to and fro.

Actually, no wonder if UNVR have that excellent performance. The market of daily need products is certainly a promising one, and it will never subside. Bath soap, toothpaste, laundry detergent, and stuff like that, is something that is needed in large quantities by the entire population in Indonesia. Have you ever imagined what would happen if you did not shower for a day? And UNVR is the only major player in that exceptionally large market. Its closest competitor is Wings Group, which is not listed on the exchange.

Because of its nearly perfect performance, then the stock price is very high. This time, UNVR share price is no longer at Rp10 per share, but 15,250. It results a market cap of Rp116.4 trillion, or the equivalent of 13.5 times of its assets, and 24.9 times of its equity, which makes UNVR become the most expensive stock in IDX. Although the company always gain great net profit every year, that expensive stock price still capable to make PER of 30.0 times.

However, the high price of UNVR shares is considered reasonable because the company itself has very strong fundamentals. So now, judging from the technical side: If you are planning to buy UNVR, then don’t do that after the price goes up dramatically as it is today. Since the beginning of May when the other shares had slumped, UNVR actually rose dramatically from 13,850 to 16,200, encouraged by the news of the acquisition of Sara Lee. Although later the shares price dropped, but it was still above 14,000. Usually after rising sharply like it, then in the future, the shares will at the postion in the range between 15,000 and 16,000. But because it has gone up quite a lot, in the next two weeks, UNVR may be down to 14,000 (in average). That's when you need to go, and stay where you at for a long time.

Looking at the prospects, UNVR is very suitable for long-term plan. UNVR rarely fall dramatically except for technical correction, and it also not affected by the ups and downs of IHSG. Thanks to its remarkable performance, UNVR is the only company in IDX that deserves the highest rating.

Rating of Financial Performance: S
Rating of Stock at 15,250: A

Original article was written at May 17, 2010

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