Consulting: Shares Buyback, Dividends, and the News of Companies

1. Hi Mr. Teguh, I heard that Semen Baturaja (SMBR) would conduct the buyback of shares. What is it? And how it affects the performance of the company?

On September 17, 2013, management of SMBR announced that if needed, they are ready to buy back the company’s shares in the stock exchange, in order to keep the stock price to remain stable. This decision was a response after at the end of August 2013, the Jakarta Composite Index (JCI) tumbled down while the stock price of SMBR dropped from 560 to 360. The amount of funds to do the buyback is maximum Rp102 billion, which is taken from the company's cash deposits (as of Second Quarter 2013, SMBR had cash of more than Rp1.5 trillion, as result of its IPO).

How to Read the News about Companies

Saturday the 26th of November, 2011, a large bridge that crosses the Mahakam River in Kutai Kartanegara (Kukar) Regency, East Kalimantan Province, suddenly collapsed, and killed at least 40 people. But for investors in the stock market, it is not the number of victim that matters, or who are the incompetent developer that responsible for the bridge construction. But, which companies that had its operations disrupted due to the incident? Because as we all know, Kukar is a working area of many coal mining and oil palm plantation companies, and some of which are listed on the Indonesia Stock Exchange (IDX).

For investors who have memorized the way of working of natural resources companies, especially coal company, the collapse of the bridge could mean that the shipment of coal from the location of mine to the harbor through Mahakam river will be blocked by the wreckage, and that means a negative sentiment for the related stock.

Bank BTPN: Best Bank so Far

Bank Tabungan Pensiunan Nasional (BTPN), or you may call it the National Bank of Pensionary Fund, is a bank belonged to a giant private equity fund, Texas Pacific Group (TPG), which is managed by its Indonesian partner, Northstar Equity Partners (Northstar). TPG acquired the Bank on March 14, 2008, or just two days after the company's listing on the Stock Exchange. By Northstar, the Bank entered a new business venture, namely the small medium enterprises (SME) banking and financing, while still running its original business of pensionary credit and financing.

In Indonesia, the leader in SME financing business is Bank Rakyat Indonesia (BBRI), or you may called People’s Bank of Indonesia, and several other banks. But the banking services in Indonesia, including that of BBRI, only able to reach about one-third of all SMEs throughout the archipelago. So in this case, BTPN does not need to compete with BBRI to enter the SME banking business, as its market is still wide open. According to data from the Ministry of Cooperatives and SMEs, until the end of 2011, there were approximately 55 million unit of SMEs in Indonesia, and is predicted to continue to grow. BTPN itself estimates that there are about 15 million SMEs in Indonesia, which are potential to be their clients.

The Jackpot Stocks!

In the last two years I found an interesting fact in the market, where there are some stocks which are fundamentally good, with reasonable or even undervalue price, but their price movement are slow. Within a few months, these stocks sometimes just moving around at narrow range. For example, if at the beginning of January the stock was in position of 1,000, then at the end of June he would still in the position of the 1000's. But in a particular time between January to June, the stock might suddenly rose significantly, perhaps up to 2,000 or 2,500 in just one or two months, before then turning back to 1,000. So in this case, investors who buy the shares at the price of 1,000, then sell it at the price of 2,000, you may say that he has gained the jackpot.

But you should not think that the 'jackpot' could happen every day. Sometimes the investors have to wait long enough, could for months, just to get a single jackpot a year. Some lucky ones may obtain the jackpot quickly, where he bought the stock on Monday, then it is skyrocketed on Tuesday. But some others may have to wait for months, sometimes with some shakes during the course (instead of skyrocketed the stock was down first).

Ace Hardware Indonesia

If we talking about Ace Hardware, what comes to your mind when you hear the word of 'Ace Hardware'? For me, I will answer: 'That is the name of a big store, which I often stopping by to look around, but almost never buy anything'. The reason is, although it must be admitted that Ace Hardware store sells unique and good quality items that are not available in the other stores, but most of these items are not so necessary for the daily needs. For example, do you need a set of barbeque grill tool for backyard party at your house? Well, if your house has a backyard, then maybe you do. But really, how many houses in Jakarta which has a backyard? This is a crowded city, you know?

On the other hand, if you have a big house in elite area like Menteng, Pondok Indah, or Pantai Indah Kapuk, then the barbeque grill tool was probably a must have item, and so it is with the other products that are sold at Ace Hardware. Yup, Ace Hardware, is not an ordinary retail store. They sell the products of home improvement, products that are specifically designed to improve the quality of your house, as the residence for you and your family. For example, in addition to the barbeque grill tools which mentioned above, you will find a wall clock with a design that is very, very fancy, at the Ace Hardware, even though the price is much more expensive than ordinary clock. But for some people, the clock price is commensurate with the ‘beautiful’ effect that is given to the overall interior appearance of the house.

Ekadharma International: A Small Cap but Fundamentally Good Stock

In the last few days I receive suggestions from several friends to discuss an unknown stock, but its fundamentals are good. This stock is Ekadharma International (EKAD). EKAD is a relatively small company with a market capitalization of only Rp227 billion at a price of 325. Although classified as a small cap stock, but its trading volume in the market is quite liquid with an average transaction of 4 million shares per day.

EKAD is a specialist manufacturer of adhesive tape (duct tape) and wrapping foil, with the brand 'Daimaru'. The company's factory is located in Pasar Kemis Industrial, Tangerang, while the company's distribution network is spread from Medan to Makassar. EKAD also had a side business in the field of printer cartridge refill service, but its contribution to company overall revenues is small. In addition to selling its products in the country, EKAD also exported adhesive tape to Malaysia adhesive.

Garuda Indonesia: Reborn

Since the shares are traded on the Indonesia Stock Exchange on February 11, 2011, Garuda Indonesia (GIAA) had never on my watchlist. The reason is simple: It is an overvalued stock which represents a poor company. But now, after more than a year, GIAA seemed to look pretty, and it’s not because of some make up or something. In the full year 2011, the company had 39.1% increase in revenue, and its net profit rose 56.1%, from Rp518 to 809 billion. Pretty enough to be taken? Actually, not yet, but probably soon.

GIAA is one of state-owned companies that had poor financial performance in the past. The company almost continuously recorded net loss from year to year so that causes a huge deficits on its balance sheet, which in turn causes a deficiency of capital. It was only in 2008, GIAA is no longer had deficiencies, but it was not due to an increase in performance, but because of the increase in paid-up capital. Until the company held an IPO in early 2011, GIAA is a poor company at all.

How to Analyze the Management of Company

What are the criteria that must be met by a company in order to produce maximum performance? The answer to that question can vary, but definitely, one of them is: A great and reliable management team. No matter how good a company, but if it is controlled and managed by incompetent people, then the result will definitely ugly. In relation to our investments in stocks, this is an important thing to note, considering small-minority holders do not have the power to appoint certain people to sit on the board of directors of the company, unless you are a large investor who can afford to buy a stock in large quantity, let say 20% of the paid-up capital (so that you become a major shareholder).

So what are the criteria of a good and trusthworthy management? Based on my experience, these criteria can be grouped into three parts. To put it simply, a company's management team can be said to be good and can be trusted, if they meet the three 'work':

1. Work hard
2. Work good, and
3. Work fair.

Confused? Okay, here's the explanation.

ICTSI Jasa Prima

ICTSI Jasa Prima (KARW), formerly known as Maharlika Indonesia, and before that was named Karwell Indonesia, since May 3, 2012, changed its name to ICTSI Jasa Prima, after the company was taken over by International Container Terminal Services, Inc. (ICTSI), a port service company from the Philippines. KARW business activities also changed from previously garment into port services. The corporate action is interesting, because currently there are expectations that the sector of infrastructure will be booming in the near future, and the port is indeed a part of infrastructure. Is ICTSI also have the same expectations, so that they then put their investment in Indonesia?

ICTSI acquires KARW on May 3, 2012, in Singapore through its subsidiary, ICTSI Far East (IFE), which IFE bought 469.7 million shares that representing 80% stake of KARW, with a purchase price of between Rp74 - 77 per share. Then , based on Bapepam regulation, IFE as the new controlling shareholder in KARW must conduct a mandatory tender offer to buy the remaining shares in the market, and this causes the stock continued to rise since last August.

Metrodata Electronics: Undervalue Stock

Every three months, every time the companies released their latest financial report, I used to search for stocks with good fundamentals (good company’s performance), while on the other hand its valuations are still low, or undervalue. If I cannot find any, usually when the Jakarta Composite Index (JCI) is in its peak position as it is now, then the criterion is pushed down to one of which: 1. A good stock with a fair valuation (not overvalue), or 2. A not-too-bad stock but with low valuation. And here we go, Metrodata Electronics (MTDL) is a stock that if based on its performance in the nine months of 2012, and by its current price, can be classified as a stock with not-too-bad fundamental but with low valuation.

Bank Bukopin, and Acquisitions

Recently I received quite a lot of emails from friends asking about the stock of Bank Bukopin (BBKP). And after I checked, I found out why. Looks like some investors are bought this stock at prices above 700 per share, as influenced by the news that BBKP would be acquired by, if not by Bank BRI (BBRI), then it by Social Security (Jamsostek). Indeed, in August, BBKP stock soared from 640 to 760 because of the acquisition news. But later, BBKP was down and returned to the position of 640.

The cause of the decline is actually quite clear, namely because the management reiterated that they would not be acquired by any company, including BBRI. The management prefer to hold rights issue to augment its low-capital, with the Cooperative of Bulog Employees of Indonesia (Kopelindo, BBKP’ current majority owner) as the stand-by buyer. So BBKP is not being acquired by any company. But then there is news that BBKP cancel its rights issue, and prefer to sell subdebt worth Rp1 trillion to Social Security to increase their capital. I guess this is what makes the company's stock eventually dropped, because the news is confusing. So what they’re gonna do? Rights issue or subdebt? Or another option?

Forbes Not-so-Accurate List

If you were Aburizal ‘Ical’ Bakrie, what is your reaction when Forbes says if your wealth 'only' US$ 2.1 billion? If it was me, I would smile, are you kiddin’ me? Let see, when Bakrie & Brothers (BNBR) executing the right issue in 2008 alone, this parent company of the Bakrie Group obtained fresh fund of Rp40.1 trillion, or about US$ 4 billion. Not to mention the spate of rights issues, IPOs, from several other members of the Bakrie Seven Brothers, where the standby buyers are themselves. And outside of a few companies listed on the exchange, the Bakrie Group still has dozens of companies engaged in almost all business sectors.

Not only Ical (or precisely the Bakrie family, because in the Bakrie Group there are not only Ical, but also Nirwan, Indra, and Roosmania Bakrie), but the value of assets of other conglomerates may not be as 'small' as presented by Forbes. The figures presented by Forbes may seem very large (of course, who say that US$ 1 billion is a little money?), but in fact, it is possible that some of the entrepreneurs in the Forbes list have a much greater amount of wealth than mentioned.

Sierad Produce: Too Bad to be True

What is the staple food in Indonesia? The answer is definitely rice, unless you’re agree with the Minister of Agriculture who told the society to replace the rice with cassava (aw come on!). But what is everyone's favorite dishes? Believe it or not, the answer is chicken, whether it be fried, baked, or processed into sausages or nuggets. Yup, chicken is a favorite food of Indonesian people from all social status, ranging from factory workers to the owner of the factory itself. The taste is so delicious and the price is more affordable than other types of meat, causing the demand for chicken is always increases over time, in line with the growth of population.

Because the chicken business is always prospective, would not be surprised if local poultry companies almost always recorded brilliant financial performance. You name it, Charoen Pokphand Indonesia (CPIN), Japfa Comfeed (JPFA), Malindo Feedmill (MAIN), and Multibreeder Adirama (MBAI), they are all good and profitable companies. Luckily, these four companies are listed on the Stock Exchange so we can buy their shares. Only the latter, MBAI, has delisted from the exchange after it was acquired by JPFA.

Petrosea, part 2

Some of you may already know that Mr. Lo Hong Kheng (LKH), the most famous individual investor in Indonesia, holds shares of Petrosea (PTRO) in substantial amounts, ie 65.9 million pieces of shares, equivalent to 6.5% of the total outstanding shares of the company. If LKH bought PTRO at current price, ie Rp1,290 per share, then he has invested at least Rp85 billion or about US$ 8 million in this subsidiary of Indika Group. Although these funds may be only a fraction of the total assets of him, but of course you can not call it a dime. The question is, what is so interesting about this stock?

Petrosea

This week I have take attention to Petrosea (PTRO) that continues to declining lately, especially after its stocksplit with a ratio of 1 : 10 in last March. When this article was written, PTRO was at the position of 2,075, so if counted from the last six months, PTRO already lost more than half of its market value, precisely 52.0%. But from the fundamental side, PTRO’s financial performance was actually good in the First Half of 2012, where the company recorded US$ 21 million of net profit that is reflects 26.2% of ROE. So, what’s wrong with the stock?

What is Tapering? Is it Good or Bad?

This December may be the 'anxious months' for investors and traders, as there are several issues that feared would cause further decline of Jakarta Composite Index, whereas its position was already low. One such issue is the problem of tapering, and that is what we will discuss in this article.

Basic Fundamental Analysis of Banking

When I made an ebook about methods of fundamental analysis, I forgot to tell you that there are some companies that have a structure of financial statement that is somewhat different from the usual. In the ebook, I show you the example of Unilever Indonesia (UNVR), and that's the view of financial statements in general. However, for companies in the field of financial services, like banking, multifinance, insurance, etc., the structure of the statement is not like it (although the essence is the same), so that you need to read it a bit differently. This article will discuss the issue.

Understanding the BI Rate

Early last month, the central bank of Indonesia, Bank Indonesia (BI) announced an increase in the BI rate to be 6.75%, from the previous 6.50%. What is the BI rate? Why it is increased? And how it would affect the JCI? Although I do believe that most of you are already understand ‘bout this, but hopefully this article can shed some light for those who do not yet get it.

Quantitative Easing, and its Effect on JCI

A few days ago, the central bank of Japan (Bank of Japan/BOJ) announced the quantitative easing (QE) policy, in which the BOJ would inject funds worth a total of US$ 1.4 trillion to the economy of the Sakura country. This amount is equivalent to the amount of money in circulation in Japan, so the QE policy will make the outstanding amount becomes doubled. According to BOJ Governor, Haruhiko Kuroda, the policy aims to re-grow the economy, which stagnant for more than a decade by the lack of the amount of money circulating in the community. The inflation rate in Japan itself has already minus aka defltaion in the past 15 years. 

An Easy Example of Value Investing

When you want to buy a car and you have budget of Rp150 million, then what kind of car would you choose? You may choose Toyota Avanza, Daihatsu Xenia, Nissan Grand Livina, or Suzuki Ertiga. But what if I told you that with the funds, you may be able to obtain a Kijang Innova that its original price was around Rp200 to 250 million? 

Krakatau Steel

In the IDX, the sector of iron and steel is not so popular if compared to other metal sectors such as nickel and tin. The cause is because Indonesia is not among the country's largest steel producer in the world, such as India and China. Therefore, companies in the business of iron and steel in this country is only a few, and Krakatau Steel is the only major player in Indonesia in this field. In the fist half 2010, the company recorded total assets of Rp 13.3 trillion, or about US$ 1.4 billion.

Overview of the Indonesian Economy

Last Friday, August 23, 2013, the Government through the President and related Ministries announced a package of policies to save the economy, including the monetary policy from Bank Indonesia (BI) as a monetary authority, to address the weakening Rupiah that had reached the level of Rp11,000 per U.S. Dollar. When viewed from the policy package name of 'saving the economy', the ultimate goal of this policy package is certainly not merely to avert Rupiah not to fall again, or to address the decline in the stock market (JCI) that occurred lately, but to save the economy of Indonesia as a whole. But it might as well raise the question, what is actually happen with our economy?

Chairul Tanjung

If you are quite active in the market, you might be familiar with names such as Aburizal Bakrie, Hary Tanoesoedibjo, James T. Riady, Franky Wijaya, Anthoni Salim, and Edwin Soerjadjaja. Yup, they are the few who dominate the capital market in Indonesia. Each of them is the owner of Bakrie Group, Bhakti Group, Lippo Group, Sinarmas Group, Salim Group, and the Astra Group (But Astra has already sold to Jardine Matheson, the Hong Kong-based investment group). And they also included in the richest people in Indonesia. Then, where is the position of Chairul Tanjung?

Harum Energy

When Berau Coal Enery (BRAU), a coal company, decided to hold IPO sometimes ago, some analysts slightly questioned the decision. It was because regardless of BRAU’s fundamental sector itself, coal sector in Indonesia was on the bad state lately. On the late 2009, most of the coal companies in Indonesia were enjoying the increase in revenue and net income significantly, which was supported by the increase in the price of coal. But in the first quarter 2010, the coal companies’ revenue started to decline, along with the sluggishness of production volume, and the decline was still continued until the first half 2010.

Indofood CBP

Indofood Sukses Makmur (INDF) is identical with Indomie, because it’s its flagship product, which until today, it seems that there is no rival to that (Wings Food indeed tries to replace Indomie with Mie Sedaap, but so far apparently has not been successful). But actually, the business coverage of INDF is broader than just merely selling the instant noodle with Indomie as its brand. As the name implies: Indofood. INDF is one of the largest integrated food producers companies in Indonesia, that control the food sector from upstream to the downstream.

Understanding the Stock Trading Suspension

You may have bought a stock, and then when you are about to sell it, you can’t. After you check it, it turns out that the stock you bought exposed to suspension aka cannot be traded in certain period, so that automatically, you cannot sell it because the stock exchange authority (the IDX) doesn’t allow any transaction relating to the sale and purchase of shares that you hold. Then, it’s reasonable if you panic in such situation, because your money status that is stuck in the stock becomes unclear (if you only experience loss, it is still tolerable). But is thus your funds really disappear just like that? Here’s the explanation.

An Easy Way to Determine Support and Resistance

If you read the stock recommendation on the newspaper or internet media, there are often words like this: ‘We predict that Jakarta Composite Index (JCI) today will move in range 3,087 – 3,217’. Well, you must be understand that the smallest number, which is 3,087, is called as support point, while the biggest number, which is 3,127, is called as resistance number. So, how does a security analyst define the support and resistance points? It turns out to be an easy way. You can do it yourself, even in just seconds.

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.

How to Read the News from Companies

Let’s say you have plan to buy a house. If a property agent come to see you and offer a house at the price of Rp400 million, while you know that the market price of the house is only Rp300 million, will you take the offer? Of course not. But how if the agent said because there are certain reason such as the strategic location, building quality, etc, then the house will worth Rp500 million in one next year. Therefore, if you buy the house at the price of Rp400 million, then you will get profit of Rp100 million. How’s that? Then you probably started to be tempted to buy the house, although the price is more expensive than it should be.

Berlian Laju Tanker, part 2

Yesterday, management of Berlian Laju Tanker (BLTA) announced the result of right issue. And as we have discussed in previous article, the right issue indeed wasn’t absorbed by the market entirely, but only about 74% (of Rp1.2 trillion), and the rest of it was bought by the standby buyer (link). According to the management’ opinion, the 74% was consistent with the initial target, so there’s nothing to worry about.

Berlian Laju Tanker

Lately, the market is made to be worry by the decline of one of the exceptional shares in its sector. Berlian Laju Tanker (BLTA) is undoubtedly the biggest shipping company in Indonesia. So, it doesn’t feel ‘right’ if you don’t collect the company’s stock. Moreover, on the first quarter 2010, BLTA succeeded to record net income of US$25 million, from previous loss of US$73 million. But why did the stock continued to fall? And why in the last month (since early June), the decrease became more and more drastic? When this article was written, BLTA slumped in position of 240, after previously in stable position of 340.

Berau and Benakat: What the Hell?

Judging from the production volume on 2009, Berau Coal Energy (BRAU) is the fourth largest coal company in Indonesia, after the combination of Arutmin and Kaltim Prima Coal (both subsidiaries of Bumi Resources), Adaro, and Kideco (subsidiary of Indika Energy). On 2009, Bumi Resources recorded coal production volume of 57 million tons, Adaro recorded 41 million tons, Kideco was 25 million tons, and BRAU was 14 million tons. BRAU was greater than Indominco Mandiri (the subsidiary of Indo Tambangraya, which recorded 12 million tons), and PT Bukit Asam (11 million tons). It looks like BRAU is a serious coal company, should be like that.

Tempo Scan Pacific

From the fundamental quality side, Tempo Scan Pacific (TSPC) is actually quite equal to Kalbe Farma (KLBF), but the stock isn’t much liquid. However, its non-liquidity factor also causes the valuation of TSPC to be less expensive than KLBF, and the stock might be interesting to be noticed after it continued to fall lately, with the total decline of almost 30% in the last six months. Although there are so many undervalue stocks on the exchange currently, but TSPC is also considered interesting to be noticed, considering the type of its sector that is safe from the negative sentiment, and the movement of shares is not too influenced by fluctuations of the composite index (the beta is less than 1), which now remains bearish.