What industry that is most immune to the turmoil of economies both
nationally and globally? The answer is of course, the consumer goods
industries, including food and beverage industry. Rupiah may fall, JCI may
decline, but people will always need to eat and drink. That's why for most
investors in the IDX, they have a policy that keep them to hold at least one
stock of consumer goods companies, with the expectation that the stock would
remain stable despite other stocks fall. Then, Tiga Pilar Sejahtera Food (AISA)
is may considered as one of it.
AISA is a food company with a long history. The story began in 1959, when a
businessman named Tan Pia Sioe established a corn vermicelli
factory in Sukoharjo, Central Java, with the brand 'Cap Cangak Ular'. In
1978, Mr. Tan died, and the business was handed over to his son, Priyo
Hadi Susanto. In 1992, PT Tiga Pilar Sejahtera (TPS) was
formally established, and the company was handed toStephanus Joko Mogoginta which
became director of the company, while Mr. Priyo remains in control as a
commissioner. There is no information about whether Mr. Stephanus is the son or
nephew of Mr. Priyo, but he is the grandson of Tan Pia Sioe.
In 2001, TPS entered the industry of dried noodles, and set up a dried
noodles factory in Sragen, Central Java, but by keep maintaining corn
vermicelli business. Two years later, ie in 2003, TPS went deeper into dried
noodles business by acquired PT Asia Inti Selera Tbk (AISA), a manufacturer of
dried noodles with brand 'Ayam 2 Telor'. Since AISA was a company listed on the
Stock Exchange, the acquisition is automatically made TPS listed on the Stock
Exchange (backdoor listing). The name of PT Asia Inti Selera then changed to PT
Tiga Pilar Sejahtera Food (AISA). AISA then held its first right issue,
where the new stocks were officially listed on the stock exchange on November
7, 2003.
Several years later, ie in 2007, AISA began to expand again, which marked
by the change of logo of the company. One year later in 2008, the company held
its second right issue, and earned cash of Rp327 billion. These funds were used
to acquire three companies, namely PT Poly Meditra Indonesia (PMI), PT Bumi
Raya Investindo (BRI), and PT Patra Power Nusantara (PPN). PMI is a
manufacturer of snacks like biscuits, snack noodles, wafers and sweets. While
BRI is a cooking oil manufacturer and PPN is a power company. By holding own
supply of edible oil and power for the needs of food production, it was
expected that the performance of AISA in the future will be more efficient, as
the company managed to keep its production costs low.
The expansion continues. In 2010, AISA acquired five oil palm plantation
companies, to meet the needs of raw material of crude palm oil (CPO) for BRI.
AISA also went into the rice industry by acquiring a rice trading company, and
a rice mill company. And in 2011, AISA held its thirs rights issue to obtain
the net proceeds Rp690 billion, which the funds were used to develop the
business, and pay off debts due to the acquisition which mentioned above. Also
in this year, AISA launches a number of snack products with various brands,
including acquiring ‘Taro’ brand from Unilever Indonesia (UNVR).
Going forward, AISA still have a lot of plans of business development. In
this 2012, the company is focus on developing low price snack products (Rp1,000
per pack, or about 10 cents), especially in the category of biscuits and
crackers. Thanks to the availability of own supplies of cooking oil and power,
so the production cost is low and the selling price of the end product can also
be pressed to be cheap. Consequently, AISA has a large market share for its
snack products, as consumers from the middle and low class can also buy these
products.
While in the area of oil palm plantations, AISA is now planting palm oil
trees in an area of 5 - 8 thousand hectares per year, so the company will
have about 45 thousand hectares of oil palm plantations in 2015. The company is
also looking to build several CPO processing plants with a capacity of 30
tonnes of fresh fruit bunch (FFB) per hour. If the process is going well, then
in the future, AISA will be able to sell CPO or cooking oil with its own brand.
But for now, AISA is not sell cooking oil directly to consumers, but rather use
it as raw materials for snack production. AISA is actually sold some of its FFB
to other companies, but the value of sales is relatively small compared to the
company's overall revenue.
Finally, about rice business, AISA is currently developing a rice business
with a target of 5% share of the rice market in Indonesia in 2016.
The company will establish rice mills in the centers of rice in Indonesia,
up to total of eighteen mills in 2016, from just two at this time. In addition,
AISA is also working with universities to develop vitamin rice, which will make
the rice produced by the company has more value than ordinary rice.
Well, sounds promising, right? Thus, AISA will have business in three
sectors at once, ie snacks, cooking oil, and rice. And how about the company's
original business, ie corn vermicelli and dried noodles? Looks like the
management didn’t have any plans to expand the business, but only run it as
usual.
Okay, now we are into the financial statements. In the First Quarter 2012,
AISA recorded Rp599 billion of revenue (after discounts, its net was Rp577
billion), with the following details: Rp106 billion or 17.8% came from sales of
vermicelli and noodles, Rp162 billion or 27.1% came from sales of snacks, Rp7
billion or 1.1% from the sale of FFB, and Rp324 billion, or 54.0% came from
rice sales. Based on these data, it is clear that AISA’ main business is no longer
corn vermicelli and dried noodles, but rice. Sales value of rice has also been
growing rapidly compared to the period of previous year, which was only Rp109
billion (the increase is almost three-fold, while the increase of company’
revenue as a whole was only 64%). It is a very promising improvement, given the
AISA had just entered the rice industry in 2010. Moreover, we all know that
rice is the staple food of Indonesia, so that its consumers will continue
to grow along with the increasing number of population. Currently AISA is
practically the largest rice mill and trading company in Indonesia, behind Bulog (Badan
Usaha Logistik/Logistics Enterprise) which is owned by the Government
In conclusion, with the profile of the industry, and the company's expansion
plans that we have been discussed above, it is no doubt that AISA is a very,
very promising company, so the stock is ideal for long term investment.
Currently, the property sector is booming, but we never know when it will end.
Likewise, the banking sector which was great in the year 2010 is now also going
to slow. While the rice? People will consume it all the time. Similarly,
vermicelli, dried noodles, snacks, and cooking oil, it all will always be
consumed by so many people at all the time, so that AISA is offering a revenue
and net income that are consistent for the long term. So, what are you waiting
for?
But still, there are several things to note here.
First, the margin of rice trading business is actually small because AISA
doesn’t have rice land, so they have to buy rice grains from farmers. In the
company's public expose held on last 12 June 2012, management acknowledged that
though the rice trading business is safe in terms of volume (the volume of rice
sold will never go down), but it is less profitable from the view of margin.
Management had mentioned that the company has obtained permission for the land
concession covering 5,000 hectares in West Kalimantan, but did not explain
whether the land will be used as a rice field or something.
In addition, AISA only sell branded rice, such as rice in packs of 5 - 10
kilograms that we usually found in the supermarkets. The price of this branded
rice is more expensive than regular rice, so that its market share will be
automatically limited. The company have no plan to sell ordinary rice with
cheap price, which is probably because they couldn’t do it. Rice, after all, is
a main food of Indonesian people, and occupies the first position in the list
of basic needs, so its supply is set by the Government, and that means
politics. So in this case, AISA could not compete against Bulog.
Second, you can say that AISA has taken a right decision by entering the
snacks food industry, since it has always a good prospect. However, AISA will
have to deal with many stronger companies in this field, such as Garuda Food,
Nabati, Kraft Foods, Wings Food, Nestle, Unilever, Siantar Top, Orang Tua, and
Indofood. AISA may have a good position as a manufacturer of vermicelli and
noodles. But in the field of snacks, the company is just a newcomer. The brand
of snacks produced by the company has not been widely known to the public, and
perhaps that is why AISA acquired the brand 'Taro' from Unilever, which already
had a brand position in the public. But of course, AISA can not always acquire
snack brands from other companies.
But indeed, AISA has tried to address this problem by hijacking one of the
officials of Orang Tua Group, Mr. Jo Tjong Seng, which then placed as director
of branding and marketing of the company. The presence of Mr. Jo is expected to
help the company in brand campaign. We'll see how it plays out.
Third, and most important, since AISA is still in the business development
process, then the result will not be appeared in the near future. As mentioned
above, the company’ target for oil palm plantations and rice business is
expected to be achieved in 2015 and 2016 respectively. The company itself only
expects net income of Rp200 - 250 billion for the full year 2012, or about US$
20 – 30 million. Let say that AISA’ equity at the end of 2012 would reached Rp2
trillion (in First Quarter 2012, it was Rp1,886 billion), it means that AISA’
ROE would only 10% - 12.5%, a very small number for a consumer goods company.
In terms of growth, AISA is has a good track record, especially since the
company began its expansion in 2007. Including in the First Quarter 2012, AISA
was also recorded a 115.1% of net profit increase, compared to first quarter
2011, significant enough. But still, this growth has not been able to make AISA
to become a profitable company.
Then, still related to the business development of the company, since 2007,
AISA has made two rights issue to raise funds for the acquisition, which in May
2008 and December 2011. The exercise prices for the new issued stocks were
almost the same, ie Rp522 per share in 2008, and Rp560 per share in 2011. How
AISA current stock price? 760, or not changes much. The problem is, since the
company in the future will still needs a lot of funds to expand distribution
networks for its snack products, to plant more oil palm trees, and to build
rice mills, it is possible that the company will hold a right issue again,
which certainly would dilute your ownership as an investor.
The ultimate conclusion, the prospect of AISA is very interesting, where
the company has a chance to be a large food company someday, probably as large
as Indofood. But the process would take time, and also maybe a little extra
struggle of the management team. But one thing is clear, AISA’ current
performance is not good enough. From its total assets of Rp3.5 trillion, there
only Rp156 billion which represents the balance of retained earnings. So we
better see next quarter, and hopefully we do not have to wait until 2015.
Okay, back to the question above, is AISA can be considered to be an
investment in the consumer goods sector? I say, probably not, at least for now.
But if the stock is fall to below 600, then you may buy it. At its position,
AISA’ PBV is below 1.0, and it is fair enough if we consider the company’ track
record and prospects.
Original article was written in July 20, 2012.
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