Show Me the Money!

Some time ago I met with an old friend (we meet regularly every 2 – 3 months for small chit chat), and we talked about stock investments and others. Coincidentally a few days earlier, this friend of mine had just met with one of the hottest figures in Jakarta: The Governor of Jakarta, Mr. Ahok, in one event of gathering. In the forum Mr. Ahok talked much about this and that, and my friend told me that he was a fun person! Previously my friend did not ever notice about Ahok, but after the gathering, he explicitly said that he liked the governor.

And because the name of Ahok is currently a trending topic in the national media related to his strife with the Legislature of Jakarta because of ‘invisible’ funds of Rp12 trillion or so (about US$ 1 billion) in the province budget, we discussed about the topic, only to come to the conclusion that.. we do not understand anything about it because we did not follow the news. For example, when we discussed about the budget of provision of UPS at the allocated price of Rp5 billion (about US$ 450,000) per unit, we do not even know, what is UPS? United Parcel Service?

However, when my friend asked me, how do you think about Ahok? I answer, about the province budgets or anything related to it, or whether Ahok stand on the right or wrong position in this case, I do not know about it at all, and frankly I do not care too.

But as one of the millions of people in Jakarta, then I only care about one thing, ie: The urban planning of Jakarta, and the provision of decent public facilities.

And since 2012, when the city of Jakarta was governed by Jokowi and Ahok, we could say that the change is real. I moved to Jakarta since 2008, when the Governor was Fauzi Bowo. And during my stay in Jakarta between 2008 and 2012, I always said: If it was not for the sake of my job, I would rather moving back to Bandung!

But since Jokowi - Ahok take over the position of Governor and Deputy Governor of Jakarta at the end of 2012, then Jakarta immediately experiencing various changes in urban planning and everything, and it can be directly seen and felt by myself as a citizen of Jakarta, South Jakarta in this case, without the need to 'consult' to MetroTV or TvOne, including:

1. In 2013, when there was a great flood, the road of TB Simatupang was severely flooded. Soon thereafter, the river near the area was dredged, the road surface elevated, and there is an open green space and an artificial lake to absorb water in case of heavy rain. As a result, in this year the road of TB Simatupang is no longer flooded.
2. Since the very beginning of my stay in Jakarta, traffic jam was always an issue. However, since the year 2012, the provincial Government provide new facilities of public transport like Kopaja AC, added the number of TransJakarta buses, so now traveling using public transport became much more comfortable than ever before. One of the personal satisfaction that I often feel is when I sit back in the a speeding bus on the busway lane, while still on the same road, I could see private cars were stuck in severe traffic jam.
3. Not far from my house, ther is an outdoor fitness facility that I can use for free! Provincial government also built a number of green parks where people can jog and breathe the fresh air of the trees planted.
4. Street vendors, who often cause the traffic jam, transferred to proper locations. Traditional markets are built and tidied to become comfortable places for everyone to shop.
5. The roads are smooth, if there are potholes it would immediately patched, broken lights are immediately replaced, damaged pavement immediately repaired, aaanndd so on. And although Jakarta is relatively still crowded because of the density of the population, but in terms of urban planning the city began to similar to Jogja, and that's why I like to live here.

And now, if you are in my position, then tell me: How couldn’t I like Ahok as my Governor? As a resident of Jakarta, we liked Ahok not because he was anti-corruption or something (because we also do not understand about it), but because he has a real work! Of course, the Governor needs time to fix Jakarta as a whole (including, Jakarta still had large floods not long ago, although only a day). However, if Ahok continues to work as he does, then I suppose when he eventually ceased as a Governor, all citizens of Jakarta will keep him in their mind as a figure who left legacies that benefit so many people of the City.

And what about Ahok’s temper that makes him like to curse and tend to be unethical? (I've watched the video, and Ahok indeed outrageous where at the meeting with the legislature, he showed no respect to the elders). Well, it's another thing, which some people may not like the governor because of his style, and I also think that Ahok deserved criticized for it. But as citizen of Jakarta, I would prefer to criticize Ahok if did nothing for Jakarta and, say, make Jakarta became chaotic like the City of Bekasi. But so far, as already mentioned above, Jakarta has become a way more comfortable than before Ahok assumed position as Vice Governor in 2012.

(And frankly, when it comes to the real works, I also want to criticize Jokowi that although he was very successful in Jakarta, but Mr. President so far did not managed to control the prices of basic necessities or 'do someting' to curb the weakening rupiah.. but we'll see how it goes).

Okay, then what is the relationship between Ahok and stock investment?

When the story about the feud between Ahok vs. Parliament of Jakarta blown up to the media, the feud started to attract a lot of analysis and opinion from the 'observer', whether it be on television or social media, sometimes also with the ‘advanced analysis’ that confuse the layman (including the explanation of the UPS specification, and also an explanation about why the price of Rp5 billion per unit is understandable, if the observer is in a position against Ahok). Although the majority of the public supports Ahok in this feud, but some people also blamed Ahok with their own arguments. Some of them even consider Ahok as the worst Governor in the history of Jakarta, by completely ignoring his real achievements as the caretaker of the Province.

But if you ask the citizens of Jakarta who knew almost nothing about the budget policy, rules for the submission of the budget bla bla bla.. then what do we think about Ahok? Well, you already know the answer. In fact, we do not expect nothing but that Jakarta could be a comfortable city to live in, and the Governor so far is able to meet these expectations.

And those perspective is also applicable to the investment in shares. Some time ago I met with a friend who’s an entrepreneur in the field of coal mining. And when our discussion focused on the question: Which coal stocks that are most attractive for long-term investment? My friend answered.. Bumi Resources! Ie BUMI. Why? Well, it’s very simple: BUMI is currently the largest coal mining company in Indonesia, with a production volume of more than 100 million tons per year.. with proven coal reserves of more than 2.9 billion tons! BUMI was so large that even if we combine the second and third-largest coal companies in Indonesia, ie Adaro Energy (ADRO) and Bukit Asam (PTBA), then the combined volume of coal production and proven coal reserves remain much smaller than BUMI.

But if BUMI is that good, then why its stock slumped so deep? I replied, that’s clearly because BUMI’ financial statements were so ugly, with negative equity and so on. My friend asked again, but if we looking at the facts of the company’s volume of production and coal reserves above, BUMI is extremely good! Do you think that the investors in the capital market do not understand about the business of coal? I smiled: Sir, it is precisely because we do not really understand about the coal, so that we just look at the financial statements of the company. We can not fully understand the coal sector or others, because we're not just invest in one stock or one sector. So for us, either as small retailers or institutions with billions of funds, our principle is simple: 'Show me the money!'. We don’t like to bother about details and technical things such as production volume bla bla bla.. what is important that the company bring us profit, that's it! Now take an example, can’t you see that Garuda Indonesia (GIAA) is one of the best company in the country? The plane schedule almost always on time, great quality of service, and the plane seems to be always fully seated.

But if the company suffering losses as it seems from its financial statements, then why do I buy the shares??? And that's why this GIAA, even though it has been years, but it's not going anywhere.

While PTBA, although the company is smaller than ADRO and BUMI in terms of volume of coal production, but the share price remains high because the company still produces substantial profits until today, instead of suffering a loss like BUMI. Regardless of the fact that it is the largest coal company in Indonesia, but the stock of BUMI will only go up significantly if the financial statements became better, which shows that the company generating huge profits and the like. If we take a look at the example of two coal companies, namely Garda Tujuh Buana (GTBO) and Resource Alam Indonesia (KKGI), the stocks were also flying high back in 2011 when the company recorded a tremendous profit in their financial statements, although their coal production volume and reserves are small. But because they failed in make large profits in subsequent years, then how about their shares today? You can see it for yourself.

Logo PT Bukit Asam, a coal company with the best financial performance in 2014

So just like we do not care about the budget or his political disputes when we looking at Ahok as the Governor, in investing we also do not want to be bothered about the operational details of the company except to the extent that we need to know. And if we can say, 'just show me the works!' to Ahok, then we can also say, 'just show me the money!' to the companies. As a resident of Jakarta, other than Jakarta being a comfortable city to live, what else do we care? Similarly as investors, Other than money and profit, what else do we care? About the details on how the company makes the profit, that’s the problem of the directors and commissioners as the managers of the company, not us as shareholders. If the management fails to generate profits for the company, whatever the reasons and no matter what the management says, we will not buy the shares.

So from now on, you can also apply the above article's title in your investment activities: 'Show me the money!' Beware of companies that talk a lot about the prospect of this and that but the result is nil. Also be careful with companies that although the booked large profits in their financial statements, but only because of the sale of assets or the like. Of course, this does not mean that you should ignore the technical aspects of company operations at all, only do not put it on the thing that is somehow more important, namely: Net profit for the company, for us as shareholders.