Blue or black?

Blue or black?

By Riyadi

JAKARTA (JP): In this time of uncertainty, only risk-taking
investors with liquidity to spare would dare invest in equity to
seek higher gains.

But for those who are wary of taking a high risk but still
want to benefit from potential big gains from stock markets would
be advised to invest their money in blue-chip stocks.

Some would argue that compared with world-class exchanges such
as the New York or London stock exchanges, the Jakarta Stock
Exchange (JSX) does not really have blue chips. But if investors
compare stocks with their peers on the JSX, they can still pick
blue chips.

According to Eva Nilayanti Muis, head of research at Kim Eng
Securities, blue-chip stocks are normally sought after stocks.

They are big enough in market capitalization to drive the
market up or down.

They should be among the most liquid stocks, so that they can
be easily bought and sold.

And most importantly, they must have good fundamentals.

According to Kim Eng Securities, JSX's top 10 stocks -- those
that can be categorized as blue chips -- are cigarettemakers
Gudang Garam and Hanjaya Mandala Sampoerna, foodstuffs producer
Indofood Sukses Makmur, international telephone operator Indosat,
domestic telephone monopoly Telkom, consumer products company
Unilever Indonesia, retailer Ramayana Lestari Santosa, cement
producer Semen Gresik, pharmaceutical and health care producer
Tempo Scan Pacific and carmaker Astra International.

Monthly financial magazine Asiamoney's latest Best Managed
Companies Poll named Ramayana, Gudang Garam, Sampoerna, Unilever
and Astra as investors' favorite Indonesian companies.

The poll, conducted annually, was based on 258 responses from
214 institutions in the Asia-Pacific region -- including Japan
and Australia --, Europe and the United States.

Following are the characteristics of these stocks.

Gudang Garam: With average annual sales of more than 70
billion cigarettes, Gudang Garam is the country's largest
cigarettemaker. Despite its low free float of 15.7 percent,
Gudang Garam is the second largest stock in terms of market
capitalization, trailing just after Telkom. Its market cap as of
March 7, 2001 reached Rp 26.1 trillion. Not only is Gudang Garam
the second largest capitalized counter, it also has solid
fundamentals, with no foreign currency debt. Moreover, the
cigarette industry has always been one of the better-performing
sectors on the JSX. Last year, its stock prices plunged by 32.29
percent to Rp 13,000, and dropped further to Rp 12,950 on March
9. Gudang Garam still trades at an attractive price earning ratio
of below 10 times, much lower than its average of above 20 times
during the past five years.

HM Sampoerna: Considered the most innovative, transparent and
aggressive Indonesian cigarettemaker, Sampoerna is the fourth
largest stock in terms of capitalization, totaling Rp 12.5
trillion as of March 7. Sampoerna managed to reduce significantly
its foreign debt to about US$101 million last year from $370
million recorded in early 1999. Sampoerna stock prices fell by
19.57 percent last year to Rp 14,900, and dropped further to Rp
13,250 on March 9. Sampoerna currently trades at an attractive
price earning ratio of below eight times, far lower than its own
historical valuation of above 20 times.

Indofood: The firm is the country's largest food producer,
with its noodle products found in the majority of Indonesian
households. It is the sixth largest capitalized stock, totaling
Rp 10.2 trillion as of March 7. It managed to reduce its foreign
debt from above $700 million in 1999 to $452 million as of Sept.
30, 2000. The company also claims that 84 percent of its foreign
debt is hedged. Indofood reported a 54 percent drop in net profit
to Rp 646 billion last year, with operating profit rising 5
percent to Rp 2.4 trillion. Indofood stocks fell by 55.33 percent
last year to Rp 775, but then increased to Rp 900 on March 9.

Indosat: The state international telephone operator is one of
the few companies that has a clean and strong balance sheet. It
held cash and cash equivalents of Rp 2.3 trillion as of the first
nine months of last year, while its debt amounted to only Rp 25
billion. It reported a strong net profit of Rp 1.75 trillion last
year, a 27 percent increase from Rp 1.38 trillion recorded in
1999. It is the fifth largest capitalized stock on the JSX,
totaling Rp 11 trillion. Indosat stock prices dropped by 45
percent last year to Rp 9,000, but rose this year to close at Rp
10,000 on March 9. At this price, the stock still trades at an
attractive price earning valuation of around six times.

Telkom: The country's domestic telephone monopoly is the
largest capitalized stock on the JSX, totaling Rp 30 trillion as
of March 7. Like Indosat, Telkom also booked a strong net profit
growth of 17 percent last year to Rp 2.54 trillion from the Rp
2.17 trillion recorded in 1999. Telkom's stock price dropped by
52.87 percent to Rp 2,050 but rose this year to Rp 2,775 on March
9. At this level, the stock still trades at an attractive price
earning ratio of around nine times.

Unilever: A producer of household products, the company is
claimed to be one publicly listed company unaffected by the
economic crisis. It is the third largest capitalized stock,
totaling Rp 15.8 trillion as of March 7. After a stock split,
trading in Unilever stocks is increasingly on the rise, making
the stock more liquid. Unilever stock was the only stock among
the top 10 stocks that gained last year. The stock rose by 8.7
percent last year to Rp 12,500 and soared further this year to Rp
17,250 on March 9.

Ramayana: The company, which operates a chain of supermarkets
and department stores across the country, has been chosen by
world financial institution Morgan Stanley as one of the index
barometers for investment managers for the company's brilliant
achievement all through 1999, rising from the destruction caused
to its outlets during the May 1998 riots. The company recorded
sales of Rp 2.3 trillion last year, increasing by 43 percent from
Rp 1.65 trillion in 1999. Ramayana's stock price dropped by 15
percent last year to Rp 2,625, but rose this year to Rp 2,750 on
March 9. At the current price, the stock trades at an attractive
earning multiple of around nine times.

Semen Gresik: Currently the country's largest cement producer,
Semen Gresik has a production capacity of 17.25 million tons of
cement per annum. But if the plan to spin off Semen Padang and
Semen Tonasa from Semen Gresik proceeds, the company will no
longer be the country's largest cement producer. But the effects
of the spin-off will not be entirely negative, as part of the
proceeds could be used to repay some of the company's outstanding
debts. Semen Gresik's stock fell by 48.44 percent last year to Rp
5,800, but then rose to Rp 6,000 on March 9. The stocks trade at
an earning multiple of around 10 times.

Tempo Scan: A conglomeration of pharmaceutical, health care
and cosmetics manufacturing companies, Tempo Scan has been chosen
as one of the top 10 stocks because its wide range of products
reaches most urban people in the country. In addition, the
company has also settled all of its debts. The company's stocks
dropped 48.3 percent last year to Rp 3,075 and slid further to Rp
3,050 on March 9.

Astra International: A major diversified investment holding
and operating company with significant interests in a number of
sectors, Astra is better known as an automotive company, with the
Kijang van being its most popular product. Astra, however, is
dogged by foreign debt. Although its debts have been
restructured, they will still burden the company's finances in
the future. Astra's stocks dropped 47.7 percent last year to Rp
2,000, and has since slid further to Rp 1,850.